Trademark Date

April 10, 2024

Right2022 (Ne) 10117

CaseCourt

Intellectual Property High
Court, Second Division

number- A case in which the court modified the judgment in prior instance and granted theplaintiff's alternative claim in its entirety, holding that a claim for payment oftrademark royalties under a trademark license agreement, which is a conflicting
interest transaction, cannot be granted due to the absence of a resolution of the boardof directors approving the conclusion of the agreement, but also holding that a claim
for compensation for damages due to tort of infringement of the trademark right does
not constitute an abuse of right.
Case type: Trademark Right Infringement Lawsuit
Result: Modification of the prior instance judgment
References: Article 365, paragraph (1), Article 356, paragraph (1), item (ii), and Article
369, paragraphs (1) and (2) of the Companies Act; Article 47, paragraph (1), Article 46,paragraph (1), item (iv) and Article 39 of the Trademark Act; Article 104-3, paragraph(1) of the Patent Act; and Article 1, paragraph (3) of the Civil CodeRelated rights, etc.: Trademark Registration Nos. 4923608, 5012587 and 5775734
Judgment in prior instance: Tokyo District Court, 2019 (Wa) 2614, rendered on October25, 2022
Summary of the Judgment

1. This is a case in which the Plaintiff, a holder of trademark right s (the "Plaintiff's
Trademark Rights") related to the three trademarks, "東京芸術センター", "神戸芸術セ ン タ ー " and " 福 岡 芸 術 セ ン タ ー " (the "Plaintiff's Trademarks"), sought thepayment of royalties for the Plaintiff's Trademarks or damages equivalent to royalties
from the Defendant, based on the following allegations: [i] principally, the Plaintiff hadconcluded a trademark license agreement (the "Trademark License Agreement") with
the Defendant and the Defendant has used the Plaintiff's Trademarks in accordance withthe same agreement; and [ii] alternatively, in the case where the Trademark License
Agreement is not found to have duly come into effect, the Defendant's use of each of
the Plaintiff's Trademarks constitutes the infringement of the Plaintiff's Trademark
Rights, respectively.
2. The court of prior instance found that a contract document of the Trademark License
Agreement is not found to have been duly executed as it was prepared by A (the1Plaintiff's representative, and also the former joint representative of the Defendant at
the time of conclusion of the agreement) without authorization from the Defendant's
representative whose name was put down in the contract document, and therefore theTrademark License Agreement is not found to have taken effect by the contract
document. Based on this finding, the court of prior instance dismissed both of thePlaintiff's claims by holding that the Plaintiff's claim for compensation for damages due
to tort of infringement of trademark rights against the Defendant cannot be allowed as
it constitutes an abuse of right, due to the following reasons: the Plaintiff was merely aservice provider entrusted by the Defendant with the management service for thebuildings bearing the same names as the Plaintiff's Trademarks, and there is no goodreason to allow the Plaintiff to claim an exclusive right with respect to the Plaintiff's
Trademarks against the Defendant, which is the entrusting party.
3. In this judgment, the court held as follows and granted the Plaintiff's alternative claim
in its entirety, while upholding the decision of the court of prior instance that thedisputed acts do not constitute the "use" of the Plaintiff's Trademarks with respect tothe building nameplates placed on the upper parts or exterior walls of the buildings but
they do constitute the "use" of the Plaintiff's Trademarks with respect to what is postedon the websites.
(1) As the Trademark License Agreement concluded between A, as the Plaintiff'srepresentative, and the Defendant is a conflicting interest transaction, it is required toobtain approval at a board of directors meeting of the Defendant (Article 365, paragraph(1) and Article 356, paragraph (1), item (ii) of the Companies Act), and directors witha special interest in resolutions of the board of directors are prohibited fromparticipating in voting (Article 369, paragraph (2) of the Companies Act). So, even on
the premises of the Plaintiff's argument, it was only Directors A and B that attended theboard of directors meeting alleged to have adopted the resolution of approval, and thequorum of directors at the abovementioned board of directors meeting (two directors)
was not met, as Director A was prohibited from voting. Therefore, the Defendant canargue that the agreement is invalid without the need for discussing whether theTrademark License Agreement duly took effect.
(2) Plaintiff's Trademark 1 was initially filed for registration naming the Defendant as
the applicant, but the applicant's name was changed to the Plaintiff before itsregistration. Although an assignment transaction of the right concerning Plaintiff's
Trademark 1 is a conflicting interest transaction, the Defendant can raise an argument
against the Plaintiff that the transaction is invalid as it was not approved by theDefendant's board of directors. However, the Defendant cannot raise a defense of2invalidity of the registration of Plaintiff's Trademark 1 as it cannot be invalidated by arequest for invalidation trial due to the elapse of five years from its registration (Article
47, paragraph (1), Article 46, paragraph (1), item (iv) of the trademark Act, and Article104-3, paragraph (1) of the Patent Act).
In addition, in this court case, the reason for the change of ownership in Plaintiff's
Trademark 1 from the Defendant to the Plaintiff was to transfer the right to a party
initially intended at the time of filing the application, and it cannot be found that thePlaintiff should be restricted from exercising the Plaintiff's Trademark Right 1 only due
to the absence of a resolution of the board of directors.
(3) B and his children, C, D and A, had entered into an arrangement to conduct realestate businesses through the Defendant as part of their tax planning scheme forinheritance of B's properties. This kind of strategic allocation of assets, including
intellectual properties, for tax saving and other purposes is a generally available scheme,and therefore, it is not immediately considered unnatural to make the Plaintiff, which
is a service provider for the Defendant, instead of the Defendant, which is the businessowner, acquire trademark rights. In addition, the amount of royalties under theTrademark License Agreement is not considered to be unreasonably high. Further, theTrademark License Agreement is held invalid due to A's failure to follow the procedures
concerning conflicting interest transactions required under the Companies Act. In lightof the circumstance of this case wherein the Defendant's directors excluding A are foundto have given discretionary power for the management of real estate businesses to A,
no situation can be found to have existed at the time of preparing the Trademark License
Agreement that would hinder A from obtaining approval from the Defendant's board ofdirectors in compliance with the relevant necessary procedures, and the Plaintiff would
have been able to claim royalties for the Plaintiff's Trademarks from the Defendantunder the Trademark License Agreement if the approval of the board of directors had
been obtained. Further, it is found that the Defendant had paid the Plaintiff royalties for
the Plaintiff's Trademarks as specified in the Trademark License Agreement for theperiod from August 2009 to February 2016, and the fact of this payment could havebeen easily noticed by B, C and D, who are directors. However, no fact indicating that
B, who died in this period, raised any objection before his death can be found, and it isassumed that C and D had acted on the premises that the Trademark License Agreement
was valid until the Defendant notified its intention to terminate the relevant service
agreement in May 2016, and there is no evidence to rebut this assumption.
Considering the totality of these situations and circumstances described in (2) above,the court cannot find that the Plaintiff's claim of infringement of its Trademark Rights
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against the Defendant constitutes an abuse of right and should not be allowed.

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