Research on Appropriate Protection of Rights against Cross-Border Infringement
Involving Network-Related Inventions
I. Purpose of the Research
Along with the advancement of digital networks, intellectual property infringement is taking
place on the internet through increasingly sophisticated and complicated schemes, exacerbating
cross-border infringement of intellectual property rights. The Intellectual Property Strategic
Program 2016 calls for further strengthened measures to address this problem.
Focusing on the patent system, among Japanese intellectual property systems, when a networkrelated invention is used in the technology for providing a service for Japanese users via a server
located abroad, for example, even if the service provider holds a Japanese patent right for thattechnology, the Japanese Patent Act might not be applied to an act that is suspected of infringing
the patent right. Furthermore, even if the Japanese Patent Act is applied, the act in question might
not be found to constitute direct or indirect infringement in the meaning under the existing law.
There may be other cases in which a Japanese patent right cannot be enforced against infringement,such as where the patent right is being infringed beyond the national border by multiple parties.
We conducted this research with the aim of collecting basic data helpful for discussing
appropriate protection of Japanese patent rights for the future with regard to network-related
inventions.

II. Contents of the Research(1) Public information survey
The advancement of digital networks is making on-line infringement of intellectual property
rights more complicated. In order to appropriately ascertain the essence of this problem, it isnecessary to deal with a wide range of inventions being practiced via networks.
Accordingly, we adopted a broad definition for "network-related invention," as referring to aninvention (including both an invention of a product and an invention of a process) that can bepracticed using a combination of multiple computers (e.g. a server, client) connected via a network.
One of the characteristics of a network-related invention is that the invention can be processedin a decentralized manner, by placing components of the invention, such as a server and a client, indifferent countries and regions. In addition, multiple parties can be involved in performing
decentralized processing. Thus, it may be easy to put network-related inventions into practicebeyond the national border.
With these characteristics in mind, a typical scheme of cross-border infringement of a patentright relating to a network-related invention is indicated in Figure 1. Here, "cross-borderinfringement" is defined as an activity in which a single actor (single practicing party) or multipleactors (multiple practicing parties) perform respective acts both in the country where a patent rightis registered and another country or region, thereby satisfying all elements of the patented invention.
Figure 1: Typical scheme of cross-border infringement by a single actor or multiple actors
Company X or Company Y(Step 1)Company X(Step 2)
Terminal (b)(Processing 2)
in JapanNetworkServer (a)(Processing 1)
outside Japan(2) Domestic questionnaire survey
We conducted a questionnaire survey targeting Japanese companies, etc. to ascertain whether
they have experienced cross-border infringement of their rights relating to network-relatedinventions. Among the 32 respondents, only one respondent (3% of the total) answered that it
experienced cross-border infringement, whereas the other 31 respondents answered that they do nothave such experience (16 respondents; 50%) or that they do not know (15 respondents; 47%). On
the surface, this result suggests that Japanese companies do not have an immediate concern about
infringement involving network-related inventions.
However, we identified 24 types of infringement schemes the respondents are concerned about(Figure 3) and 16 types of infringement schemes against which they seek protection (Figure 4).
Furthermore, 18 respondents (56%) explained specific types of infringement schemes against
which they seek protection and the reasons for seeking protection. We confirmed the fact that there
is a call from industry for increased protection against infringement involving network-relatedinventions.
Based on the results of the survey, we found that protection is most needed against an
infringement scheme adopting a client-server system that uses a server located abroad.

Figure 2: Computer system layers to which respondents belong(32 respondents [actual number] ; 64 respondents [total number])4, (6%)
a. コンテンツ・アプリケーション
b. プラットフォーム

18, (28%)
19, (30%)c. ネットワーク
d. デバイス・部材

12, (19%)
11, (17%)e. その他

a. Content/application programsb. Platformc. Network
d. Devices/materials
e. Other
Figure 3: Analysis of types of infringement schemes respondents are concerned about
TypeCountry where the server is locatedNo. of actors

In JapanOutside
JapanIn/outside
Japan

Total

No
answer(1)
Clientserver(C/S)
system(oneserver locatedin one country)

1

1

10

1

32240

3

93 or more

00000

No answer

1

30

2

6Total480618(2) C/S system(multiple
servers locatedinmultiple

10000020001

1

3 or more

00011

No answer

00224countries

Total(1) + (2)002464821024

Figure 4: Analysis of type of infringement schemes against which respondents seek protection
TypeCountry where the server is locatedNo. of actors

In JapanOutside
Japan

In/outside
JapanTotal

No answer(1)
Clientserver(C/S)
system(oneserver locatedin one country)

10

100

12

2

20

1

53 or more

000

11

No answer

150

1

7

Total

380

314(2) C/S system(multipleservers locatedinmultiple
countries

1000002000003 or more

00011No answer

00011Total

00022380516(1) + (2)(3) Domestic interview survey

In response to the questions concerning the Copyright Act, uploading of files was mentioned asa type of cross-border copyright infringement. With regard to the application of the Copyright Act,
some respondents commented that it is not necessary to adopt the territorial principle under theCopyright Act as strictly as under the Patent Act but that a more flexible approach should beadopted for determining the governing law and jurisdiction.
In response to the questions concerning the Unfair Competition Prevention Act, most
respondents mentioned infringement of trade secrets as a type of cross-border infringement, whilesome respondents referred to export or import of counterfeit products.
An opinion we frequently heard from respondents was that even when infringement of trade
secrets was committed outside Japan, if it could affect Japanese companies, the jurisdiction ofJapanese courts and the applicability of Japanese law should be recognized flexibly.
With regard to all of the abovementioned three intellectual property laws, that is, the Patent Act,
the Copyright Act, and the Unfair Competition Prevention Act, respondents pointed out thedifficulty in taking legal action to enforce their rights against infringers who are abroad, and mostof them demanded that Japanese courts recognize extraterritorial application of these Japanese laws

in the future.
Furthermore, in connection with infringement of patent rights, problems involved in claim
drafting and complexity in litigation proceedings were pointed out.
(4) International questionnaire survey
In the United States, different criteria for determining infringement are adopted for a system
claim and a method claim. In finding infringement based on the "use" in the case of a system claim,
the place where the claimed system is "used" is tied to the location where the system as a wholeoperates, in accordance with §271(a) of the U.S. Patent Act. On the other hand, infringement of apatent right for a method claim requires all steps of the method to be performed within the UnitedStates. In terms of implementation of the U.S. Patent Act, we confirmed that there is a presumption
against extraterritoriality in principle, with an exception that §271(f) and (g) are applicable toaddress cross-border infringement. Meanwhile, we did not identify the existence of a call forincreased protection of patentees beyond the level exercised under the existing law against crossborder infringement of US patents.
With regard to the situation in the United Kingdom, based on the Menashe Case, there may becases where, even if one of the physical components of a system claim (e.g. a host computer) is
located outside the United Kingdom, the claimed invention would be regarded as being put into
effect in the United Kingdom and infringement would be found. There was a comment that in thecase of cross-border infringement, there is a sufficient possibility to have infringement berecognized to exist within the United Kingdom by arranging claim descriptions. Meanwhile, we did
not identify the existence of a call for increased protection of patentees beyond the level exercisedunder the existing law against cross-border infringement of UK patents.
In Germany, in the case of infringement of a patent right for a method claim committed bymultiple parties, supposing that some steps of the method are performed by an infringing party inGermany and the other steps are performed by another infringing party outside Germany,
infringement may be found in Germany if the acts relating to the steps performed outside Germany
have been directed by the infringer in Germany. Meanwhile, we did not identify the existence of acall for increased protection of patentees beyond the level exercised under the existing law againstcross-border infringement of German patents.
In France, except for the case of indirect infringement, infringement would not be found unless
all elements of a claim are performed within France. While we noticed a demand for a clearer
definition of "essential elements" of an invention in terms of indirect infringement, we did not
identify the existence of a call for protection against cross-border direct infringement of French
patents.
China does not have a clear legal provision concerning an act of practicing a patent outside thecountry. In legal interpretation, an act of practicing a patent outside the country is not included inthe scope of application of the Chinese Patent Act, and in fact, this kind of case has not been seen.
Meanwhile, we did not identify the existence of a call for increased protection of patentees beyond
the level exercised under the existing law against cross-border infringement of Chinese patents.
In South Korea, there are two court cases that addressed cross-border patent right infringement.
In these cases, the court considered specific points according to the type of case, such as how an act
to perform the main step among the steps that constitute a system claim was performed, or who was
the substantial infringer of a patent right for a method claim. However, a criterion for assessing anact performed outside South Korea, including the relationship with the territorial principle, has notbeen established yet, and this issue is yet to be discussed systematically or actively. Ideas proposedat the present stage include broadening the interpretation of "indirect infringement," and expanding
the definition of "use," which is among the elements of "practice" under the Patent Act, to explore
the possibility of direct infringement.
(5) Discussion at the committee
If an invention for which a patent has been granted (Article 2(2) of the Patent Act) is "worked"(Article 2(3)) by a third party as a business without legitimate title or reasonable grounds, such actof the third party constitutes infringement of the patent right (based on the opposite interpretationof Article 68 of the Act). At the committee, we focused only on direct infringement and left indirect
infringement to future discussion.
In order to find infringement under the Patent Act of Japan, all elements of a claim need to besatisfied by an infringing act committed within or beyond the national border. Based on thisprerequisite, we discussed an interpretation approach through which a patented invention isconsidered to have been "worked in Japan." For the sake of convenience in discussion, we focusedon infringement of an invention of a process (or method) committed by a single party.
Specifically, we focused on the place of the "main act" and the "place of market" as factors forconsidering flexible interpretation of the place of "working," without putting too much emphasis on
the strict territorial principle. The place of the "main act" is a concept according to which, if any
part of the main element among the elements of a claim is performed within Japan, the patentedinvention is found to have been "worked in Japan," even where other elements are performed
outside Japan. The "place of market" is a concept according to which a patented invention is foundto have been "worked in Japan" if the working of the invention has an impact on the Japanesemarket (e.g. economic impact (an increased profit) and technical impact).
Possible interpretation approaches while taking into consideration the place of the "main act"
and the "place of market" suggested at the committee include interpreting the place of the "mainact" as the place of "working," interpreting the "place of market" as the place of "working," andinterpreting the place of the "main act" as the place of "working" on condition that the "main act"
involves an economic activity.

With any of these approaches adopted, it is necessary to continue discussing cases in which apatent invention can be interpreted as having been "worked in Japan," while taking into
consideration the possibility of applying the territorial principle flexibly as well as the perspectiveof international harmonization.
III. Summary
In the domestic questionnaire survey, we received answers with regard to the types ofinfringement schemes involving network-related inventions the respondent Japanese companies,etc. are concerned about, and the types of infringement schemes against which they seek protection.
Their answers made it clear that protection is most needed against an infringement scheme
adopting a client-server system that uses a server located abroad.
In the domestic interview survey, with regard to the Patent Act in particular among the three
intellectual property laws (the other two are the Copyright Act and the Unfair Competition
Prevention Act), the respondents pointed out the difficulty in taking legal action to enforce theirrights against infringers who are abroad, and most of them demanded that Japanese courts
recognize the applicability of the Japanese Patent Act against infringing acts committed outside
Japan in the future. Furthermore, in connection with infringement of patent rights, problems
involved in claim drafting and complexity in litigation proceedings were pointed out.
We also conducted an international questionnaire survey and obtained information concerningcases of cross-border patent infringement considered by foreign courts, in addition to informationcollected through the public information survey. Among the surveyed countries, the United States
has clearer criteria for determining infringement than those of the other countries, and adopts
different criteria for a system claim and a method claim. Furthermore, the United States has legal
provisions designed to address cross-border infringement (U.S. Patent Act, § 271(f) and (g)) as an
exception to the presumption against extraterritoriality. We confirmed multiple court decisions
made under these provisions.
Based on the results of these surveys, we held discussions at the committee. In order to findinfringement under the Patent Act of Japan, all elements of a claim need to be satisfied by an
infringing act committed within or beyond the national border. Based on this prerequisite, we
discussed an interpretation approach through which a patented invention is considered to have been
"worked in Japan." For the sake of convenience in discussion, we focused on infringement of an
invention of a process (or method) committed by a single party.
Specifically, we focused on the place of the "main act" and the "place of market" as factors forconsidering flexible interpretation of the place of "working," without putting too much emphasis on
the strict territorial principle. The place of the "main act" is a concept according to which, if any
part of the main element among the elements of a claim is performed within Japan, the patented
invention is found to have been "worked in Japan," even where other elements are performed

outside Japan. The "place of market" is a concept according to which a patented invention is foundto have been "worked in Japan" if the working of the invention has an impact on the Japanesemarket (e.g. economic impact (an increased profit) and technical impact).
Possible interpretation approaches while taking into consideration the place of the "main act"
and the "place of market" suggested at the committee include interpreting the place of the "mainact" as the place of "working," interpreting the "place of market" as the place of "working," andinterpreting the place of the "main act" as the place of "working" on condition that the "main act"
involves an economic activity.
With any of these approaches adopted, it is necessary to continue discussing cases in which apatent invention can be interpreted as having been "worked in Japan," while taking into
consideration the possibility of applying the territorial principle flexibly as well as the perspectiveof international harmonization.