Law and PracticePatent Infringement by Cross-border Acts:
Introduction and Analysis of Recent Case Law in Japanby Masabumi Suzuki *1. Introduction
Table of Contents:

1. Introduction
2. Introduction of Cases and Judgments(1) Introduction to the two cases(2) Case No. 1(device and program patent case)(3) Case No. 2 (System patent case)

3. Analysis(1) International jurisdiction,
choice of law, and application of
the principle of territoriality(2) Evaluation of the decisions(3) Discussion

4. Conclusion* Professor, Faculty of Law, Waseda University, Japan.

The WIPO Japan Office supports this article under aFunds-In-Trust Japan Industrial Property Global (FIT/Japan
Industrial Property Global) project.

Under the principle of territoriality,1 the patent
system operates on a country-by-country basis2
wherein patent rights are eﬀective only within the
territory of the country of registration. Therefore,
whether interrelated acts across a national border(referred to as “cross-border acts” in this article)
could infringe a patent has long been a pertinentissue. With the globalization of economic activities,
the spread of the Internet, the development of theInternet of Things (IoT), and the expansion of services
via networks, this issue has become even more
important.
A typical scenario that highlights this problem
occurs when some elements or steps in relation to asystem or process patent are performed in a foreigncountry. The strict interpretation of the territoriality
principle requiring the act of infringement to becompletely carried out within the country ofregistration would lead to a situation in which
infringement cannot be charged in any jurisdiction,
albeit the patented invention being used without

1) We will discuss this principle in 3 (1).
2) As an exception, in the case of a regional patent system,
it is established in several countries and the patentright under such a system is recognized as valid in
those countries.

PATENTS & LICENSING, March 2024

Law and Practiceauthorization. Therefore, it becomes imperative to
explore how to deal with this issue in order to ensureeﬀective patent protection.
In Japan, such a cross-border issue was dealt
with in a case where a part of a process invention was
performed overseas.3 Furthermore, cases have recently
emerged focusing on whether patent infringement
would occur when constructing a system or providing
a program using an Internet network was performed
across national borders. The same parties contested
this issue in two pieces of litigation before theIntellectual Property High Court (IP High Court). In
particular, the May 2023 decision has attracted publicattention partly because it was a Grand Paneldecision handed down by the Special Division of the
IP High Court.4 This article will discuss these IP High
Court decisions.

2. Introduction of Cases and Judgments(1) Introduction to the two cases
The two cases discussed in this article wereboth brought by Dwango, Co., Ltd. (hereinafterreferred to as the “Plaintiﬀ ”), a Japanese corporation,
against FC2, Inc. (hereinafter referred to as“Defendant 1”), a U.S. corporation, and Home Page
System (HPS), Inc. (hereinafter referred to as“Defendant 2”), a Japanese corporation (Defendant 1
and Defendant 2 are collectively referred to as the3) Tokyo District Court, September 20, 2001, Hanrei-Jiho
No. 1764, p. 112, Heisei 12 (wa) 20503 (method ofelectrodeposition image formation). In a case concerning theinvention of a process consisting of six steps where thedefendant performed the initial ﬁve steps leading to thecreation of products that were subsequently sold to third
parties who then performed the sixth step of the process,the court found infringement of the patent right when thesixth process was performed domestically. This decision
relied on the so-called “tool theory,” attributing the sixth
step to the defendant. Conversely, the court determinedthat if the defendant’s products were exported and thesixth step was performed outside Japan, the defendant
had not completed all the steps of the patented process

PATENTS & LICENSING, March 2024

“Defendants”). The Plaintiﬀ’s patent rights that are
the basis for the claims in the two cases relate to afunction in a video distribution service that allows
users to exchange comments on a video screen
display. Defendant 1 provides video delivery serviceson the Internet that enable users to place commentson the screen. Since its web server, comment delivery
server, and video delivery server are located in the
U.S., the cross-border nature of the acts became anissue.

(2) Case No. 1 (device and program patentcase)
The basis of the claim in the ﬁrst case is thePlaintiﬀ’s patent right entitled “Display device,method for displaying comments, and program.”
The Plaintiﬀ alleged that the programs used in the
Defendants’ services (“the accused programs”) andthe information processing terminals in which theprograms were installed (“the accused devices”)
were within the technical scope of the patented
invention of each patent right and that the
production and use of the accused devices, as well as
the production, transferring, and oﬀering to transfer
the accused programs by the Defendants, infringed
the respective patent rights.
In the ﬁrst instance, the Tokyo District Court
dismissed the claim on the grounds that the accused
devices and programs were not within the technicalscope of the invention.5

within Japan’s territory and thus did not infringe thepatent right. The court aﬃrmed direct infringement inJapan as stated above but did not ﬁnd the fact ofexportation of the accused product. Therefore, the issue
regarding the cross-border implementation of a process
was relatively unimportant in this case.
4) In addition, the newly introduced third-party opinion
solicitation system (i.e., a Japanese version of the amicus
brief system based on Article 105-2-11 of the Patent Act)was used for the ﬁrst time.
5) Tokyo District Court, September 19, 2018, Heisei 28 (wa)38565.

Law and Practice
In contrast, the IP High Court, the appellate
court, aﬃrmed the fulﬁllment of the constituent
features of the patented Invention 1 (while denying
the fulﬁllment of the constituent features of thepatented Invention 2), and found direct infringementof the patent right 1 by (1) providing the accusedprograms through telecommunication lines, (2)oﬀering to provide the said programs, and (3)producing Defendants’ Program 1. In addition, the IP
High Court found (4) indirect infringement of thepatent right 1 by providing the accused programs.
The court thus partially accepted both the request for
an injunction and the claim for damages by the
Plaintiﬀ.6 The crucial part of the decision relevant to
the topic of this paper is quoted below.
“Japan adopts the so-called principle ofterritoriality with respect to patent rights,
according to which the patent rights of Japan areeﬀective only in the territory of Japan [...]. And,
looking at the delivery in question formallyand analytically, we can recognize that theaccused programs are transmitted over atelecommunication line (including the serveron which the accused programs are stored) inthe territory of the United States, over atelecommunication line (including the terminal
equipment used by the user) in the territory ofJapan, and over a telecommunication line in the
territory of neither the U.S. nor Japan. Therefore,
it is undeniable that not all of the transmissions
are completed in the territory of Japan.
However, if the act of provision in question
must be formally completed entirely within the
territory of Japan for patent infringement to beestablished for inventions that can be transmitted
over a network, such as Inventions 1-9 and 10,
those who attempt to implement such inventions
would easily escape liability for patent
infringement by, for example, moving somefacilities such as servers out of the country. In
today’s digital society, where many useful6) IP High Court, July 20, 2022, Heisei 30 (ne) 10077. The
author discussed this decision in detail in Masabumi
Suzuki, “Patent Infringement through Use of Servers

network-related inventions exist, allowing suchan evasive act would be extremely unjust. On theother hand, even if all the elements of theworking of a patented invention are not formallycompleted in the territory of Japan, if, from asubstantive and overall viewpoint, the working
can be regarded as having been performed in the
territory of Japan, giving the Japanese patentright eﬀect to such working would not violate
the aforementioned principle of territoriality.
Therefore, with respect to the act of provisionin question, if the provision can be regarded as
being made in the territory of Japan from asubstantial and overall viewpoint, taking into
consideration various circumstances including
whether the part of the provision performed
outside the territory of Japan can be clearly andeasily distinguished from the part performed
within the territory of Japan, whether the controlof the provision is made in the territory of Japanand whether the eﬀect of the patented invention
obtained by the provision is manifested in the
territory of Japan, it is reasonable to conclude
that the provision constitutes ‘provision’ asdeﬁned in the Japanese Patent Act.
In this case, the delivery is initiated andcompleted when a user located in the territoryof Japan accesses the website pertaining toDefendants’ respective services [..]. It is diﬃcult
to clearly and easily distinguish between thepart of the delivery that takes place outside theterritory of Japan and the part that takes place
within the territory of Japan, and the control ofthe delivery is performed by a user located in the
territory of Japan, and the delivery is directed toa user located in the territory of Japan who
desires to view the videos. Moreover, it is only
through the delivery that the user located in the
territory of Japan is able to view the video withcomments, etc. pertaining to Inventions 1-9 and
10, and the eﬀects of Inventions 1-9 and 10

Located outside Country: Dwango v. FC2 Case,” Patents& Licensing Vol. 52, No. 4, 6 (2023).

PATENTS & LICENSING, March 2024

Law and Practiceobtained through the delivery are manifested
in the territory of Japan. In light of thesecircumstances, it is reasonable to evaluate thatthe delivery in question was made in the
territory of Japan, when examined from asubstantial and overall viewpoint, even if someparts of it were made outside the territory ofJapan.”7

viewing the video transmitted from the server;
and1C. transmits the video andinformation to the terminal device;

1D. the comment information includes:and(3) Case No. 2 (System patent case)(a) Related patent rights and claims
The basis for the claim in the second case is thePlaintiﬀ’s patent right entitled “Comment Delivery
System.” The patented invention relates to a comment
delivery system characterized in that users’ comments
are displayed on a video on the display device of theterminal of a user viewing the video via the Internet
in a manner that they move horizontally and do not
overlap each other.
The claims of the patent in question comprise
Claims 1 to 13, and the invention at issue in this caseis the invention described in Claims 1 and 2(Invention 1 and 2). Invention 1 can be divided into
the following constituent features (The line breaks
are according to the decision of the IP High Court).
1I. A comment delivery system,
1A. which is a comment delivery system
including a server and a plurality of terminal
devices connected to the server via a network, inwhich
1B. the server
receives a ﬁrst comment and a second
comment to a video given by a user who is7) IP High Court, supra note 6, at 134-35 (the pages arethose of the public version of the decision available at<https://www.courts.go.jp/app/ﬁles/hanrei_jp/418/091
418_hanrei.pdf >).

PATENTS & LICENSING, March 2024

comment

the ﬁrst comment and the second comment;

a comment given time, which is a video
play time indicating an elapsed time of the video
with a beginning of the video as a reference,corresponding to a point of time when each of
the ﬁrst comment and the second comment isgiven, comprising:
1E. means for displaying the video and the ﬁrst
comment and the second comment at least
partially overlapping the video and moving in ahorizontal direction on a display device of theterminal device in a video play timecorresponding to the comment given time on thebasis of the video and the comment information;
1F. a determining portion which determines
whether or not a display position of the second
comment when displayed on the video overlaps
a display position of the ﬁrst comment; and1G. a display-position control portion foradjustment such that the ﬁrst comment and thesecond comment are displayed at positions notoverlapping each other, when they are
determined to overlap, wherein
1H. by means of transmission of the video andthe comment information by the server to theterminal device, the display device of theterminal device displays:
the video; andat the video play time corresponding to
the comment given time, the ﬁrst comment andthe second comment at least partiallyoverlapping the video and moving in thehorizontal direction in a manner that the ﬁrst
comment and the second comment do not
overlap each other.

Law and Practice
While Invention 1 above assumes that theserver transmits video and user’s comments,
Invention 2 relates to a system in which the video
delivery server and the comment delivery server
exist separately.
The Plaintiﬀ claimed that each systempertaining to Defendant’s Services 1 through 3, which
related to video delivery services with comments
over the Internet operated by Defendant 1, would fallwithin the technical scope of the patented invention.
Furthermore, the delivery by Defendant 1 of its ﬁles(i.e., video ﬁles and comment ﬁles) from its servers in
the U.S. to user terminals in Japan would constitute a“production” (Article 2(3)(i) of the Patent Act) of its
systems, thus infringing the patent right. In addition,
the Plaintiﬀ argued that Defendant 2 was conducting
the above acts as a single entity together withDefendant 1. The Plaintiﬀ sought injunctive relief tohalt the delivery of the accused ﬁles to user terminals
in Japan, demanded the deletion of the program fromthe accused servers, and the removal of said servers,
alongside pursuing damages for the joint tortious
acts of infringement of the patent rights.8(b) First instance judgment
The Tokyo District Court, in the ﬁrst instance,
dismissed all the claims.9 The following is an extractof the part of the judgment against the Plaintiﬀ’s
claims relating to the production of Defendant’ssystem.

right shall be eﬀective only within the territoryof the country concerned [...], it is reasonable tointerpret that the “production” is limited to thatin Japan. Therefore, it should be understoodthat, in order to constitute ‘production,’ it isnecessary to newly produce in Japan a productthat satisﬁes all of the constituent features of thepatented invention.”“When displaying a video with comments to auser terminal in Japan by Defendant’s Service 1,even if a comment delivery system satisfying all
the constituent features of Invention 1 is newly
created by Defendant’s Service 1 functioning
according to the procedure described in (1) c. (a)above, it is a creation of a comment delivery
system (Defendant’s System 1) with the video
delivery server and the comment delivery server
existing in the U.S. and the user terminal existingin Japan as the constituent elements.
Therefore, since only the user terminal, whichis the constituent element in Japan in thecompleted Defendant’s System 1, does notsatisfy all the constituent features of Invention 1,
it cannot be immediately approved that the‘comment delivery system,’ which is the ‘product’
to be a target of Invention 1, is being ‘produced’in Japan.”10“‘Production’ as ‘working’ of a productinvention (Article 2(3)(i) of the Patent Act) is
understood to mean the act of creating a new‘product’ that falls within the technical scope of
the invention. In addition, based on the principleof territoriality, which means that the patent8) In the ﬁrst trial, the Plaintiﬀ sought payment of 10 million
yen in damages under Article 102(3) of the Patent Act. On
appeal, however, the Plaintiﬀ amended the complaint toclaim 1 billion yen, which is part of the amount of damages
under Article 102(2) of the Patent Act , thereby extending theclaim.

9) Tokyo District Court, March 24, 2022, Reiwa 1 (wa) 25152.
10) Tokyo District Court, supra note 9, at 105-07 (the pages arethose of the public version of the decision available at<https://www.courts.go.jp/app/ﬁles/hanrei_jp/124/091124_hanrei.pdf>).

PATENTS & LICENSING, March 2024

Law and Practice(c) the Appellate court’s decision
The IP High Court, through a Grand Paneldecision, found that the actions of Defendant 1(Appellee FC2) in each of the accused services
constituted a “production” of the accused systems
and infringed the patent rights in question.11 The
following are excerpts from the decision,
maintaining its subheadings.
“(2) Whether or not Appellee FC2 ‘produced’
each of Defendant’s systems(A) Whether the actions of Appellee FC2 in the
FLASH version of Defendant’s Service 1
constitute ‘Production’ (Article 2(3)(i) of the
Patent Act) as the working of Invention 1(a) Introduction
Invention 1 is an invention of a comment
delivery system equipped with a server and aplurality of terminal devices connected via a
network, and the type of invention is aninvention of a product, and ‘production’ (Article2(3)(i) of the Patent Act) of a product as an act ofworking thereof is understood to mean the act of
newly creating a product that falls within thetechnical scope of the invention.
As in Invention 1, the ‘Production’ in theinvention of the system in which the server andthe terminal are connected via a network such as
the Internet and perform an integrated function
as a whole (hereinafter referred to as a ‘networktype system’) is understood to mean the act of
newly creating the system in which multiple11) IP High Court, May 26, 2023, Reiwa 4 (ne) 10046. English
translations of the decisions of the Tokyo District Court
and the IP High Court in this case are available on thewebsite of the IP High Court at<https://www.ip.courts.go.jp/app/ﬁles/hanrei_en/346/
003346.pdf> and<https://www.ip.courts.go.jp/eng/vc-ﬁles/eng/2023/r4
ne10046-f.pdf> respectively. However, the English
translations in this paper are by the author and do notnecessarily follow the ones provided by the IP HighPATENTS & LICENSING, March 2024

elements, each of which alone does not satisfy all
the constituents features of the invention, havean organic relationship with each other by being
connected via a network so that the system as awhole has a function that satisﬁes all theconstituent features of the invention.
(b) The act of newly creating Defendant’s System
1 in the FLASH version of Defendant’s Service 1
a. In the FLASH version of Defendant’s Service 1[...], when a user speciﬁes the webpage ofDefendant’s Service 1 to display the desired
video in the browser of the user terminal in
Japan ([ii]), the web server of Appellee FC2transmits the HTML ﬁle and the SWF ﬁle of theaforementioned webpage to the user terminal([iii]), these ﬁles received are stored in thebrowser’s cache, and FLASH of the user
terminal loads the SWF ﬁle in the browser’s
cache ([iv]); subsequently, when the user presses
the play button of the video in the webpage
displayed on the browser in the user terminal([v]), in accordance with the order stored in the
aforementioned SWF ﬁle, FLASH on the user
terminal instructs the browser to retrieve thevideo ﬁle and comment ﬁle, and the browser
then makes a request for the video ﬁle to thevideo delivery server of Appellee FC2 and arequest for the comment ﬁle to the comment
delivery server of Appellee FC2 in accordancewith the instructions ([vi]), and in response to
the above request, Appellee FC2’s video delivery
server sends the video ﬁle, and Appellee FC2’scomment delivery server sends the comment ﬁleto the user terminal, respectively ([vii]), and the

Court. As for Defendant’s Services 2 and 3, injunction
was denied with respect to the production of systems for
those services, since the business pertaining to thoseservices was transferred to a non-petitioner company.
As for Defendant 2 (Appellee HPS), the appeal was
dismissed on the grounds that the defendant was notfound to have been engaged in business activities
related to each of Defendant’s Services after the time ofregistration of the patent rights in question.

Law and Practiceuser terminal receives the above video ﬁle andcomment ﬁle ([viii]). As a result, the user terminal
can enable comments to be overlay-displayed on
the video in the browser based on the received
video ﬁle and comment ﬁle. Thus, at the time theuser terminal receives the above video ﬁle andcomment ﬁle ([viii]), Appellee FC2’s video delivery
server and comment delivery server areconnected to the user terminal via a network
using the Internet, and the user terminal’s
browser can overlay comments on the video.
Therefore, it can be said that Defendant’s System
1 equipped with functions satisfying all theconstituent features of Invention 1 is newly
created when the user terminal receives each of
the above ﬁles (hereinafter, the above act of
newly creating Defendant’s System 1 is referred
to as ‘Production 1-1’).
(c) Whether or not Production 1-1 falls under the‘Production’ under Article 2(3)(i) of the PatentAct
a. The principle of territoriality with respect topatent rights means that the establishment,
transfer, validity, etc. of patent rights in eachcountry are determined by the laws of thatcountry and that the eﬀects of patent rights arerecognized only within the territory of thatcountry (see Supreme Court Decision 1995 (O)No. 1988, rendered by Third Petty Bench on July
1, 1997, Minshu Vol. 51, No. 6, 2299, andSupreme Court Decision 2000 (Ju) No. 580
rendered by First Petty Bench on September 26,
2002, Minshu Vol. 56, No. 7, 1551), and it isunderstood that the principle is also applicablein the Patent Act of Japan.
As described in (b)a above, in Production 1-1,
the web server of Appellee FC2 sends HTMLﬁles and SWF ﬁles of the web page ofDefendant’s Service 1 for displaying the desired
video to the user terminal in Japan, the user
terminal receives them, and the video delivery
server of Appellee FC2 sends video ﬁles and thecomment delivery server of Appellee FC2 sends
comment ﬁles to the user terminal, which
receives them. The web server, the video delivery
server, and the comment delivery server are all

located in the U.S., while the user terminal islocated in Japan. In other words, in Production
1-1, each of the above ﬁles is sent from the serverin the U.S. to the user terminal in Japan, and theuser terminal receives these ﬁles across the U.S.
and Japan. The newly created Defendant’s
System 1 exists across the U.S. and Japan.
Therefore, from the principle of territoriality, thequestion arises whether or not Production 1-1
falls under the ‘production’ in Article 2(3)(i) of
the Patent Act of Japan.
b. In a network-type system, it is currently
common for servers to be located outside Japan[..]. In addition, the country in which the serveris located does not constitute an obstacle to theuse of the networked system, and therefore, even
if the server constituting the allegedly infringing
network-type system is located outside Japan,
when the terminals constituting said system arelocated in Japan [..], the system can be used inJapan by the use of the terminals, and such use
may aﬀect the economic proﬁt that the patentee
can obtain by working the invention in Japan.
In this way, it is not reasonable to interpret the
principle of territoriality strictly with respect tothe invention of a network-type system and tointerpret the fact that the server, which is part ofthe components constituting the system, islocated outside Japan as a reason why thealleged act does not constitute ‘working’ under
Article 2(3) of the Patent Act of Japan, because it
would be easy to avoid a patent as long as theserver is located outside Japan, and the patentright for the invention of the system would not
be adequately protected.
On the other hand, it is not reasonable toconclude that the existence of the terminal, which
is a part of the elements constituting the system,
in Japan constitutes ‘working’ under Article 2(3)of the Patent Act without any exception, since
this would be excessive protection of the patentright and would cause hindrance to economic
activities.
In light of the above, from the viewpoint ofproper protection of patent rights for networkPATENTS & LICENSING, March 2024

Law and Practicetype system inventions, it is necessary toconsider whether the act of creating a new
network-type system constitutes ‘production’under Article 2(3)(i) of the Patent Act, even if theserver that is part of the elements constituting
said system is located outside Japan, bycomprehensively taking into account various
factors including the speciﬁc mode of the act, thefunctions and roles performed in the invention
by the domestic components among thecomponents constituting the system, the place
where the eﬀect of the invention can be obtainedby using the system, the impact of the use on
the economic interests of the patentee of theinvention, and others; and if the act can beconsidered to have been performed in the territoryof Japan, then it is reasonable to conclude thatthe act constitutes ‘production’ under Article2(3)(i) of the Patent Act.
Looking at Production 1-1, its speciﬁc mode isthat each ﬁle is sent from a server in the U.S. to auser terminal in Japan, and the user terminal in
Japan receives the ﬁles. The transmission andreception are performed as a unit, andDefendant’s System 1 is completed when eachﬁle is received by a user terminal in Japan.
Thus, it can be conceived that thetransmission/reception is performed in Japan.
Next, Defendant’s System 1 consists ofAppellee FC2’s server located in the U.S. and theuser terminal located in Japan, and theabove-mentioned user terminal located in Japan
fulﬁlls the functions of the determining part ofconstituent feature 1F and the function of thedisplay-position control part of constituent
feature 1G, which are necessary for the mainfunction of Invention 1, namely, to display thecomments displayed on the video in a position
where they do not overlap with each other.
Furthermore, Defendant’s System 1 can beused from within Japan via the above-mentioned
user terminal, and the eﬀect of Invention 1 ofimproving entertainment in communication
using comments is manifested within Japan, andits use within Japan can aﬀect the economic
beneﬁts that the Appellant (Plaintiﬀ) can obtain
PATENTS & LICENSING, March 2024

by using the system pertaining to Invention 1
within Japan.
Considering all of the above circumstances
comprehensively, it can be said that Production
1-1 was conducted in the territory of Japan, andtherefore, in relation to Invention 1, it isconsidered to fall under ‘production’ in Article2(3)(i) of the Patent Act.
(d) The entity that ‘produced’ Defendant’s
System 1 (pertaining to the FLASH version of
Defendant's Service 1)
a. Defendant’s System 1 (pertaining to the
FLASH version of Defendant’s Service 1) is
newly created as the result of, as described in(b)a above, the web server of Appellee FC2
sending the HTML ﬁle and SWF ﬁle of the web
page of Defendant’s Service 1 for displaying thedesired video to the user terminal; the user
terminal receiving them; in response to therequest from the browser in accordance with theorder by the SWF ﬁle stored in the cache of thebrowser of the user terminal, the video delivery
server of Appellee FC2 transmitting the video
ﬁle, and the comment delivery server ofAppellee FC2 transmitting the comment ﬁle tothe user terminal, respectively; and the user
terminal receiving them. It is Appellee FC2 who
installs and manages the above web server,
video delivery server, and comment delivery
server; and these servers send HTML ﬁles, SWF
ﬁles, video ﬁles, and comment ﬁles to user
terminals. Receipt of each ﬁle by the user
terminal is automatically performed according
to the description of the program uploaded tothe server by Appellee FC2, without any
separate operation by the user. In light of theabove circumstances, the entity that ‘produced’
Defendant’s System 1 should be considered to beAppellee FC2.”1212) IP High Court, supra note 11, at 71-74 (the pages arethose of the public version of the decision available at<https://www.courts.go.jp/app/ﬁles/hanrei_jp/146/09
2146_hanrei.pdf>).

Law and Practice
The IP High Court subsequently held that
Defendant 1’s (Appellee FC2’s) conduct in the
HTML5 version of Defendant’s Service 1, as well as
in Defendant’s Services 2 and 3, also constituted a“production” as an act of working of Invention 1. It
also found that the acts of Defendant 1 in Defendant’sServices 1, 2, and 3 constituted such “production” asan act of working of Invention 2.

3. Analysis

In addition, the conclusion may vary greatly
depending on how the principle of territoriality
regarding patent rights is understood when
examining whether or not patent rights are infringed
by a cross-border act. There has long been academic
debate over the principle of territoriality, with somearguing that the principle does not exist as a legal
norm in the ﬁrst place or that it should beabandoned.14 In practice, however, several Supreme
Court decisions have aﬃrmed the existence of theprinciple of territoriality.15 The question is then how
strictly the principle should be interpreted in actual
cases.

(1) International jurisdiction, choice of law,and application of the principle ofterritoriality

While a detailed discussion of the principle ofterritoriality is outside of the scope of this paper, thefollowing points merit clariﬁcation.16

In cases where Japanese courts deliberate on
potential patent infringement stemming fromcross-border activities, the issue of international
jurisdiction and choice of law becomes pivotal since
events occurring abroad are concerned. However,the parties did not dispute the international
jurisdiction of Japanese courts in the two cases
discussed here. As to the choice of law, the applicable
framework in patent infringement cases has been
established in practice through a set of court
precedents, including Supreme Court decisions.13
Thus, Japanese law was applied accordingly in thedecisions in the two cases.

First, the principle of territoriality with respect
to patent rights consists of two key aspects: One
relates to substantive law, while the other relates tothe conﬂict of laws. With regards to the former, theprinciple of territoriality means that the patent rightis valid only within the territory of the country (orterritory extending over several countries) that
granted the patent right. In relation to the latter, i.e.,the conﬂict of laws, the law applicable to patent
infringement should be the law of the State for which
protection is sought, and the law applicable to theissues of acquisition and validity should be the law of
the State where the patent has been registered. The

13) See Supreme Court, September 26, 2002, Minshu Vol. 56,
No. 7, 1551 (card reader). According to this Supreme Court
decision, with regard to requests for injunctive relief andclaims for destruction based on a patent right, the legal
nature of the claim is the eﬀect of the patent right, and thelaw of the country in which the patent right is registeredshould be applied based on the principle of law. With
regard to a claim for damages, the legal nature of theclaim is that of a tort, and the governing law selectedbased on Article 11(1) of the (former) Act on General
Rules for Application of Laws Law (Act No. 10 of 1898)(in the current law, Article 17 of Act No. 78 of June 21,2006) should be applied.

Territoriality’ – Seeking the Clear Conﬂict of Laws
System for Intellectual Property Rights,” Annual ofIndustrial Property Law Vol. 27, 1 (2004).
15) For example, Supreme Court, July 1, 1997, Minshu Vol.
51, No. 6, 2299 (BBS), and Supreme Court, September 26,
2002(card reader), supra note 13.
16) The author has discussed the principle of territoriality indetail in the following article. Masabumi Suzuki, “thePrinciple of the Territoriality in Relation to Patent
Rights,” Patent Vol. 76, No. 14, 6 (2023) (in Japanese)(<https://jpaa-patent.info/patent/viewPdf/4337>).

14) For example, Koji Deguchi, “Competition Law andIntellectual Property Law,” in International Transaction(the Japanese Society of International Law ed. 2001) 118;
Yasuto Komada, “Reconsidering the 'Principle of

PATENTS & LICENSING, March 2024

Law and Practicesubstantive law principle of territoriality is required
under international law, while the conﬂict of laws
principle of territoriality is necessarily required as arule under the conﬂict of laws in order to beconsistent with the substantive law principle.

that the program sent from the server in the U.S.
constitutes a “provision” pursuant to Article2(3)(i) of the Patent Act as an act of working
the patented invention. This conclusion isappropriate.

Secondly, the principle of territoriality isrequired under international law because the patent
system, as a policy system established by a sovereignstate, should be applied within its own territory
while respecting the system of other countries within
their territories (the principle of patent independence
and the compulsory license system are examples ofthis concept). At the same time, the principle ofterritoriality has the practical advantage of providing
foreseeability and legal stability to business
operators.

However, the question remains whether it
was really necessary to consider the cross-bordernature of the defendant’s act in the ﬁrst place. In
other words, given that the accused programs
were automatically transmitted to users in Japan
upon their requests, the physical location of thedelivery server, even if situated in the U.S.,
renders the commencement of transmission’s
location practically irrelevant. Considering thatthe Defendants were consciously providing the
Defendant’s services to the Japanese market, theprovision of the program in Japan could bereadily approved, given that the Japanese users
were given the opportunity to use the program.

Thirdly, there is no speciﬁc norm underinternational law as to how strictly the principle ofterritoriality should be observed. In light of the factthat judicial precedents in major countries haverelaxed the principle of territoriality to some extent
with regard to the treatment of patent infringement
caused by cross-border acts,17 it should be acceptable
for Japan to apply the principle of territoriality
loosely as long as it does not undermine theunderlying purpose of the principle.
Fourthly, the IP High Court decisions in thetwo cases both applied the Patent Act in the directionof relaxing the principle of territoriality. The basic
stance of the IP High Court should be supported.

(2) Evaluation of the decisions(a) IP High Court Decision in Case No. 1
In the ﬁrst case, the IP High Court aﬃrmed17) For example, Decca Ltd. v. United States, 544 F.2d 1070
(1976); NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282
(Fed. Cir. 2005); Menashe Business Mercantile Ltd. & Anor v.
William Hill Organization Ltd., [2002] EWCA Civ 1702;
Illumina, Inc v. Premaitha Health Plc, [2017] EWHC 2930
(Pat); OLG Düsseldorf, Urteil vom 10. 12. 2009 – I-2 U
51/08, BeckRS 2010, 12415 – Prepaid-Telefonkarte; LG

PATENTS & LICENSING, March 2024

In addition, if we assume that the abovementioned act of provision was transborder, thejudgment by the IP High Court to take a loose
view of the principle of territoriality and regard
the act as being domestic in eﬀect should
itself be supported. However, the way the IP
High Court reached this conclusion isquestionable. Speciﬁcally, the IP High Court
took into consideration multiple factors such as(1) the feasibility of distinguishing between
parts of the act of provision made within andoutside Japan, (2) whether control of theprovision was performed inside of Japan, (3)whether the provision was directed to customers
in Japan, (4) whether the eﬀects of the patented
invention obtained through the provision wererealized inside of Japan, and (5) othercircumstances comprehensively. First, the criteria
merely present a juxtaposition of diverse factors,

München I, Endurteil vom 21.04.2016 - 7 O 5930/15,
GRUR-RS 2016, 07658 – Kommunikationssystem; OLG
Düsseldorf (2. Zivilsenat), Urteil vom 23.03.2017 – I-2 U
5/17, BeckRS 2017, 109826 – Pränatale Diagnostik; LG
Düsseldorf, Urteil vom 28.7.2020 – 4 a O 53/19, GRUR
2020, 1078 – Online-Sehtest. For a discussion about thesedecisions, see Suzuki, supra note 6, at 12-18.

Law and Practiceleading to limited predictability about theconclusion of judgments. Second, among thevarious circumstances listed, the purpose of (1),i.e., the feasibility of distinguishing between partsof the act of provision made within and outside
Japan, appears questionable in particular.18 An
alternative way of examining patent infringement
by cross-border acts will be discussed in (3) below
to address these issues.
(b) First instance judgment and the IP High
Court’s Grand Panel decision in Case No. 2
It must be said that the ﬁrst instancedecision in the second case lacks persuasivenessin its rejection of the applicability of a“production” (Article 2(3)(i) of the Patent Act)
simply because the server was located outside ofJapan. As will be elaborated later, “production”
should be interpreted in the context of thedeﬁnition of the non-physical and normative
concept of “working” an invention, and be
regarded as a normative concept in its own
right. Moreover, it should be interpreted whileconsidering the characteristics of the networktype system at issue in the case and the role
played by the server therein.

(1) the speciﬁc mode of the act of creating a new
system, (2) the functions and roles of thecomponents within Japan in relation to theinvention, (3) the place where the eﬀect of theinvention can be obtained by using the system,(4) the impact of the use of the system on thepatentee’s economic interests, and (5) otherfactors. Yet, these factors are only presented inparallel without any indication of how they
relate to each other or which of them shouldhave more weight. As such, the criteria lackpredictability. Moreover, in applying thesejudgment criteria, the court only provided
explanations in the direction that the act could be
deemed to have taken place in Japan, but did not
suﬃciently explain why the production of thesystem could be constructed as having occurredin Japan despite the presence of the server in the
U.S. and the transmission of each ﬁle from there.
Ultimately, the IP High Court’s decision maylack persuasiveness due to its failure to suﬃciently
clarify the basic rationale and reasoning inreaching its conclusion.

(3) Discussion

However, akin to the IP High Court in theﬁrst case, the court adopted an approachexamining various factors comprehensively
without clearly indicating the foundationalrationale underlying its judgment. Speciﬁcally,
the IP High Court in the second case considered

An act of patent infringement, ﬁrst andforemost, relates to the working of the patented
invention. Hence, the main issue in relation to theterritoriality of patent rights revolves around whether
the “working of the invention” took place in Japan.
The ultimate proposition of establishing proof liesin determining the location of the act, which isdetermined by the normative concept of “working of
the invention.” Thus, in deciding this location, it isimperative not only to consider natural observations
based on the place where the concrete and physicalacts constituting the “working of the invention” (theacts enumerated in each item of Article 2(3) of the
Patent Act) were performed, but also to evaluate18) The IP High Court decision in Case No. 1 raises the issueof the transborder nature of the communication route indetermining whether the provision of the program is adomestic act. However, with respect to acts using theInternet, which is inherently characterized bytransborder nature, it is meaningless to question thetransborder nature of the communication route, becauseeven if the transmission and reception take place inJapan, the communication route may go through aforeign country.

On the other hand, the IP High Court’s
decision is commendable in that it discusses theapplicability of “production” for the networktype system on the premise that it is a normative
concept.

PATENTS & LICENSING, March 2024

Law and Practicewhere the working of the invention can berecognized from the legal perspective.
In evaluating the place of “working of theinvention” from the legal perspective, the mostimportant question to be considered is where thetechnical eﬀect of the invention is realized.
Therefore, even if a part of the working act isphysically performed in a foreign country, if theeﬀect of the patented invention is found to berealized in Japan from a substantive viewpoint, thecourt could consider that there is an act of working inJapan as a whole.
At the same time, with regard to the scope of
the patent right’s eﬀects, it is also crucial to ensurethat business operators are not held liable for
unforeseeable infringement, thus safeguarding
freedom of operation. From this perspective andconsidering the principle of territoriality, it should be
required that the alleged infringer has consciously
committed some act in Japan directly related to theoccurrence of the eﬀect of the invention. The above
approach must conclude by further considering thecircumstances unique to each individual case.
When assessing the eﬀect of a patented
invention, it is possible to examine it from either atechnical or an economic perspective. However, since
the question here is about the eﬀect of the invention
in order to address the place where the invention is
implemented, the focus should be on its technicaleﬀect. In addition, a focus on the economic eﬀectwould lead to issues as it may include secondaryeﬀects that are diﬃcult to demarcate.
There is no need for the act physically
performed in Japan to involve the so-called essential
part of the patented invention (or, conversely, forthe act performed in a foreign country not to involvethe essential part of the patented invention).
Establishing such a requirement, in relation to apatent for a system invention, for example, could
lead to situations where infringement might not becharged if acts relating to the essential part of theinvention are performed by a foreign server (directed
towards Japan). However, given that the location of
the server is often meaningless in relation to theeﬀect of the invention, such an outcome would beunreasonable.
PATENTS & LICENSING, March 2024

In summary, when determining whether apatent right is infringed by a cross-border act,
primary emphasis should be placed on the fact thatthe eﬀect of the patented invention is manifested inJapan. Secondly, the circumstances under which theactor should be held liable for the act of infringementin Japan (as mentioned above, the actor’s awarenessof committing the act in Japan and the direct
relationship between the act and the eﬀect of theinvention) are recognized. Then, patent infringement
may, in principle, be aﬃrmed as a domestic act.
Speciﬁcally concerning the acts of constructing(producing) a system using a network or providing a
program, as evidenced in the two cases underdiscussion, even if there is a possibility of evaluatingthat a portion of the relevant act occurs outside Japandue to the server’s location in a foreign country,
infringement may still be established as a working act
performed in Japan if the action is linked to a service
directed towards Japan, and the other portion of theworking act takes place within Japan and results in
the realization of the patented invention’s eﬀects inthe country.
As previously mentioned, the judgment criteria
set forth by the IP High Court in the two cases merely
list various circumstances without suﬃciently
presenting a coherent viewpoint for consideration,
thereby lacking persuasiveness and validity as a codeof conduct. With regard to the criteria presented by
the IP High Court decision in the second case, theprimary emphasis should be placed on the place
where the eﬀect of the invention in question can beobtained in criterion (3). Furthermore, criterion (2)which relates to the functions and roles performedby the components existing in Japan is intricately
linked to the place where the eﬀect of the invention isrealized and is connected to the actor’s awarenessof the use of the invention in Japan, thus also
constituting an important factor. However, criterion(1) lacks clear guidance regarding the perspectivefrom which this should be evaluated, rendering it
less meaningful. As to criterion (4) concerning theimpact on the economic interests of the patentee,
while it holds signiﬁcance in cases with substantial
adverse eﬀects, it should not be considered decisive.
Even where the impact on the economic interests issmall, but where the technical eﬀect of the act isclearly manifested in Japan, the act should beLaw and Practicerecognized as a domestic act. Therefore, (4) should
not be deemed a decisive factor. Japan, the act should
be recognized as a domestic act. Therefore, (4) should
not be deemed a decisive factor.
Furthermore, there exists some room for
ﬂexibility in the interpretation of the concept of
speciﬁc acts constituting the “working of theinvention.” For example, “production” is construed
as an act of working because the resultant “product”
could potentially cause actual damage to thepatentee when it is exploited (used, transferred, etc.).
Therefore, the location of “production” may be
acknowledged by considering where the produced“product” can eﬀectively be exploited.
In addition, in the case of a network-typesystem, it might be easier to consider the location of“use” rather than “production” without placing all
too much emphasis on the physical location of theservers. In other words, when examining the locationof “use” of a system, it is natural to focus on where
the system is actually used, rather than solely on thephysical location of the servers that make up thesystem. Conversely, if the place of “use” is identiﬁed
as domestic, then the “product” (system) employed
for the “use” may be recognized in Japan.
Consequently, if the system is newly created for thispurpose, it could be plausible to consider that“production” also occurs in Japan.
As for “provision,” there is generally leeway tointerpret “provision” as either the action of theprovider, the recipient receiving the provision, or
both, when it takes place between parties at a
distance.19 In the scenario of a cross-border “provision,”
this entails that a single act contains both domestic
and foreign aspects. In this sense, in the ﬁrst case, itwould have been feasible to simply regard the act of“provision” as not being transborder in the ﬁrst place
but rather a domestic act, as discussed above. At thevery least, it seems that the threshold for the court to19) The “provision through electronic communication lines”
of a program as working of a patented invention isdeﬁned to be included in the concept of “transferring or

recognize the act as an act in Japan was lower in theﬁrst case, where “provision” was under consideration,compared to the second case, where a part of the act
corresponding to some constituent features of thepatented invention took place in a foreign country
and the applicability of “production” was at stake.

4. Conclusion
The IP High Court decisions in the two cases
are to be commended for their ﬂexible interpretationof the principle of territoriality to eﬀectively protect
patent rights. However, the judgment criteria they
set forth are hardly suﬃcient. It appears that appeals
and petitions for acceptance of appeals to theSupreme Court have been ﬁled in both cases, and wehope that the Supreme Court will furnish moreforeseeable standards.
Nonetheless, there are limitations in interpretingand drafting claims to adequately protect patentrights concerning cross-border acts. Therefore, it
may be necessary to contemplate new legislation
regarding the concept of the working of theinvention. At the same time, it is undeniable that the
principle of territoriality under international law also
constrains domestic legislation. Hence, in the longrun, eﬀorts should be made to establish regional
patent systems.

leasing” of a product (Article 2(3)(i) of the Patent Act),and it may be understood to include the act of giving an
opportunity to enjoy the functions of a program.

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