23

Problems Surrounding Application of Laws Relating toIntellectual Property on the Internet
Research Fellow:Mari Nakayama

Along with globalization of markets, progress of advanced information and communications technologies,
and expansion of communication networks such as the Internet, diversification has been seen in parties sending
and receiving information as well as in the types of transmittable information, and information distribution
areas have also been dramatically expanded. In line with such changes, intellectual property (IP) has become
easily available across national borders, and this has brought about frequent occurrence of transnational IP
infringement disputes. Since national borders on the Internet are unclear, it is difficult to specify, by applying theterritoriality principle in a strict sense, the place where the infringing act has been committed, and should it beat all possible to specify it, laws of a large number of countries might be applicable. To cope with this situation,
various measures are being considered to efficiently and effectively solve IP infringement occurring acrossnational borders by uniformly applying a single law of a particular country, rather than applying laws ofindividual countries of protection or places of infringement. This report reviews the significance and function of
the territoriality principle relating to IP as well as the significance of the principle of the law of the country ofprotection that has been advocated based on the interpretations of international IP conventions, thereby
exploring a reasonable rule of application of laws relating to IP infringement on the Internet, focusing on patent,
trademark, and copyright.

1

Territoriality principle for IP(1) Significanceoftheterritoriality
principle for IP
When considering a rule of application oflaws relating to IP, it is necessary to understandthe significance and function of the territoriality
principle, which has been recognized as thedominant rule on conflict of laws relating to IP sofar. Today, amid the progress of globalization,
which is increasing the needs for effective
measures against IP infringement under the
TRIPS Agreement and the global awareness ofthe necessity of strengthening IP enforcement,
the significance of the territoriality principle isbeing questioned again. Controversy has been
aroused regarding what the basis for the
territoriality principle is, whether or not the
territoriality principle includes the principle ofsubstantive law and the principle of conflict oflaws, and what relation exists between the
territoriality principle and conflict of laws.
The territoriality principle for patents meansthat “the patent right of each country is stipulated
as to its establishment, transfer, and effects by
the national law of that country, and the effects ofthe patent right are only recognized within the
territory of that country.”(*1) This principle on
conflict of laws leads to the principle ofsubstantive laws that an IP right is effective only
within the territory of the country where it isgranted. Major conventional views find the basisof the territoriality principle in the principle ofnational treatment under Article 2 of the Paris
Convention and Article 5(2) of the Berne
Convention, the principle of independence ofpatents under Article 4(2) of the Paris Convention,and the principle of independence of trademarks
under Article 6(3) of the Paris Convention. The
Paris Convention and the Berne Convention weresuccessfully established as uniform substantive
conventions at the end of the 19th century prior toother fields of private international law, and they
currently serve as a foundation for international IP
protection. It may be of great importance to find arule on conflict of laws in such global-scale IP
conventions. However, on viewing the historicaldevelopments of international IP conventions, it isrevealed that the territoriality principle has
gradually been overcome. There is a view that, inlight of the difference among countries in terms of
substantive laws, legal policies, and international
technical standards, we should still adhere to theterritoriality principle. Those who advocate thedirect application of the territoriality principle andthose who find the basis in sovereignty underpublic law seem have based such on this view.
However, IP is intangible property for which an(*1) Judgment of the Third Petty Bench of the Supreme Court of July 1, 1997 (Minshu, Vol. 51, No. 6, 2299; BBS case);
Judgment of the First Petty Bench of the Supreme Court of September 26, 2002 (Minshu, Vol. 56, No. 7, 1551; FMdemodulator case).

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● 170 ●

exclusive right is artificially granted. It is unevenly
distributed by nature, and its location can be
specified by function. In addition, there is nonecessity to uniformly apply the territoriality
principle to all issues relating to IP including
contracts, torts, and inheritance, but application oflaws should be considered depending on issues.
Some people argue that an IP infringement disputeshould be divided into two phases, the phaserelating to the effect and contents of the right andthe phase relating to the determination of
infringement, and the territoriality principle
should be applicable to the former phase whereas
the law applicable to the latter phase should bedetermined more flexibly. In this respect, there isa view that the phase of the determination of
infringement should also be divided into individual
legal matters such as who should be liable andwhat remedies are available, and different
connection points should be specified. Anotherpossible method of determining the applicable law
is to accept a correctional connection or selective
connection or to give exceptional consideration tointerests under substantive private laws so as tocontribute to the philosophy of protecting IP in
certain cases. Conflict of interests between
countries due to the difference in policies can becoordinated by public policy in the case where thecountry’s legal polices and interests are impaired,or by a special theory of connection for applying
mandatory provisions in the case where a third
party
country’s
interests
areimpaired.
Consequently, IP infringement on the Internet canbe solved by applying various rules of applicationof laws, while giving consideration to coordinationof interests between the parties concerned,
difference in legal systems and conflict of policies
and interests between countries. From thisperspective, I consider that the territoriality
principle should not be applied to all cases as an
obligatory rule, but rather the law applicable to IP
infringement on the Internet should bedetermined flexibly by applying various rules on
conflict of laws.
(2) Interpretations of the territoriality
principle in international IP conventions
This section examines the Paris Convention
and the Berne Convention, which have
conventionally been recognized as the dominantgrounds for advocating the territoriality principle.
The
Paris
Convention
providesforinternational protection of industrial property. This
convention is supported by three major concepts,
the principle of national treatment, right of priority,and principle of independence, which relate to thestatus of foreign nationals, the establishment of IP
right, and the life of the right respectively. Before
the Convention was established, foreign nationals
had been discriminately treated under bilateraltreaties or the reciprocity principle. Therefore,
upon the establishment of the Convention, theprinciple of national treatment that foreign
nationals should be treated equally to nationals
was regarded as being most significant. An
intentionally dominant view advocates that the
principle of national treatment is the basis for the
territoriality principle. However, the principle ofnational treatment is basically an issue of laws
relating to the status of foreign nationals, and it
belongs to a different category from that of rules
on conflict of laws, which relates to the scope of
application of substantive laws of individual
countries. In Japan, there are various views
regarding the application of foreign national laws,
including a view that argues that conflict of laws
depends on the provisions of a foreign national law
because conflict of laws never occurs if theenjoyment of private right is not provided under
the foreign national law. However, a foreign
national law is never applicable unless theapplication of the foreign national law isdetermined under a rule on conflict of laws, andtherefore the issue of conflict of laws should comefirst. As foreign national laws are substantive laws
on foreign affairs and they are different fromsubstantive laws on national affairs, a rule on
conflict of foreign national laws should also be
different from a rule of conflict of substantive laws
on national affairs. In other words, a rule on
conflict of foreign national laws is different from an
ordinary bilateral rule, because it is a unilateralrule that a national law should be applicable to theforum within the national territory. This leads toan interpretation that the principle of national
treatment under the Convention contains a special
rule on conflict of laws. Based on thisinterpretation, a leap of logic can be found in theview that regards the principle of national
treatment as the basis for a bilateral rule on
conflict of laws that the establishment, transfer,and effect of an IP right should be governed by thelaw of the country where the right is issued orregistered. In consequence, such a view thatconsiders the principle of national treatment tonecessarily contain the territoriality principle, abilateral rule on conflict of laws, cannot be
accepted.
Professor Ulmer drew the principle of thelaw of the country of protection from the principleof national treatment, and his interpretation ishistorically of great significance. However, fromthe history of the establishment of theConvention, the principle of the law of thecountry of protection cannot be construed as arule on conflict of laws. Furthermore, even if abilateral rule on conflict of laws could be drawn,
governing all IP issues uniformly under the law of
the country of protection is not sufficiently
supported, and it is necessary to consider conflict● 171 ●IIP Bulletin 2005

of laws depending on the types of IP and types ofissues. A recent dominant view argues that thelaw of the country of origin should be applicableto the determination of the copyright owner.
Another view advocates uniform application of
the law of country of employment or the law
governing the contract to the determination of
the remuneration for employee’s invention. It isalso argued that the law chosen ex post by theparties concerned should be applicable toinfringement. Conflict of laws should be flexibly
considered on a case-by-case basis.
2

Application of laws relating to IP on theInternet

In Japan, there are various views on theapplication of laws relating to IP infringement,
including a view to apply the law of the country ofprotection, a view to apply the law of the place of
tort (Article 11 of the Rules Concerning theApplication of Laws), a view to regard, as in the
judgment of the FM demodulator case, the claim
for injunction or destruction of the infringing
article as the issue of the effect of IP and theclaim for damages as the issue of tort and apply
the law of the country of protection to the former
and the law of the place of tort to the latter, and aview to apply the law of the place of real rights byregarding IP as real rights. Those who advocate
the law of the place of tort can also be divided, in
terms of how to deal with a remote tort thatbrings about an effect (damage) in a different
jurisdiction from the jurisdiction where theinfringing act was committed, into those who
advocate the law of the place of act, those who
advocate the law of the place of effect, and those
who advocate the application of two laws, the lawof the place of act to the liability arising fromnegligence and the law of the place of effect to theliability without fault. Such rules on conflict oflaws relating to IP infringement in the real world
may also be applicable to IP infringement on theInternet, by flexibly interpreting the meaning of
the “country of protection,” “place of act,” and“place of effect.” There is also a view that
proposes special new rules suitable for theInternet, on the grounds that, due to thecharacteristics of the Internet, the conventionalrules cannot sufficiently solve IP infringement on
the Internet. According to this view, the law of
the place of act shall be applicable in principle,
and protection shall not be available if protection
available under the law of the place of act is not
equivalent to that available under the law of theplace of effect in terms of function. This viewthus aims to coordinate the law of the place of act
with the law of the country where information isreceived. For instance, in the case where A is
protected under the law of Country X, if

IIP Bulletin 2005

protection of A’ under the law of Country Y can beevaluated to be equivalent to protection of A
under the law of Country X in terms of function,
A’ may be protected under the law of Country X,
whereas, if protection of C under the law ofCountry Z is not equivalent to protection of A
under the law of Country X, C may not beprotected under the law of Country X.
Today, the application of the law of thecountry of protection is too rigid and cannot be
accepted, and therefore the law of the place of
tort should be applied. The application of the lawof the place of effect also cannot be accepted,
because it means the application of laws of all
countries in the world that are accessible fromthe Internet, which is unpredictable to the person
whotransmits
information
andrequirescomplicated and cumbersome procedures. In lightof the necessity to protect free circulation of
information on the Internet and clarify the code of
conduct of users as well as for the purpose ofpromoting Internet transactions, application of thelaw of the place of act would be appropriate.
However, the “place of act” on the Internet is
specified constructively. The place of act may be
the address of the infringer, the place of businessof the infringer, the place from which informationis transmitted or the location of the server. Where
the location of the server is deemed as the place ofact, the connection would be found in the countries
where protection is inadequate such as copyrighthavens. In this case, it should be allowed to findanother correctional connection in the place ofbusiness of the infringer. Coordination with legal
systems of individual countries should also be
achieved through denial of protection if, under thelaw of the place of effect, the allegedly infringed
object is not included in the scope of protection or
the allegedly infringing act is not included in the
category of infringement under the law of the placeof effect.
Along with the recent trend of determining
the law applicable to a tort in a more flexible
manner, it is also necessary to consider to what
extent the application of the law chosen ex postby the parties concerned and the law of thecommon place of habitual residence can beallowed for IP infringement cases. Article 110(2)of the Switzerland’s Federal Code on Private
International Law provides that in the case ofclaims arising out of infringement of intellectual
property rights, the parties may always agree,
after the act causing damage has occurred, thatthe law of the forum shall be applicable. Thisapproach is also adopted by the Max Planck
Institute (MPI).
3● 172 ●

Rules Proposed throughout the World
IP issues on the Internet have been

discussed at WIPO on various occasions, focusing
on international rules for dealing with IP issues
under private international law. Recently, in theHague Conference on Private International Law(HCCH), work has been under way in the projectof the “draft Convention on Jurisdiction and
Recognition and Enforcement of Foreign
Judgments in Civil and Commercial Matters.”
Since IP issues were first included in the scope ofthe draft in 1991 and discussion started on
jurisdiction and recognition and enforcement offoreign judgments relating to IP, the unification ofinternational rules relating to IP under privateinternational law has been studied on afull-fledged scale. In the initial stage, the major
objective was to establish a rule for jurisdiction
and recognition and enforcement of foreign
judgments relating to IP. However, if inconsistentjudgments are handed down by different courts, itwould cause forum shopping for more favorable
judgments
and
also
harm
international
harmonization in judgments. Consequently, withthe aim of clarifying rules for determining theapplicable law, the American Law Institute (ALI)
and the MPI have recently developed detailed
drafts of such rules, while including infringementon the Internet in the scope of regulation.
(1) Second Preliminary Draft of the
Principles Concerning Jurisdiction,
Choice of Law and Judgments inTransnational Disputes
Following the publication of the draft
Convention on Jurisdiction and Recognition and
Enforcement of Foreign Judgments in Civil andCommercial Matters of the HCCH in 1999, theAmerican Law Institute (ALI) has continued withthe project, at the request of the US government,
for studying legislative measures with the
expectation that the HCCH draft convention will
be successfully established. Professor J. C.
Ginsburg, Professor Dreyfuss, and Professor
Francois Dessemontet who studied IP issues
under private international law at the request of
WIPO, have been carrying out the project as joint
reporters, and many experts from the UnitedStates, Europe, and Japan have also participatedin the project as observers. The preliminary draft
was published in January 2004. This draft is still
under discussion and may be subject to revisionin the future, but it will help to understand thecurrent view of the United States.
First, the ALI draft clearly lays down generalrules. With respect to rights that arise out ofregistration such as patents, designs, trademarks,
plant varieties, semiconductor integrated circuits,
and geographical indications, the law applicable todetermine the existence, validity and scope of
those rights and remedies for their infringement
is the law of each country of registration. On theother hand, with respect to other intellectual
property rights that need not be registered, suchas copyrights, neighboring rights, and trademarks
under common law (geographical indications),
trade names, and publicities, the law applicableshall be the law of any country where the alleged
infringing act has or will significantly impact themarket for the work or subject matter at issue.
With respect to moral rights, the law applicable todetermine the existence, validity and scope of therights and remedies for their violation is the lawof the country where the damage occurred.
Where it is clear from all the circumstancesof the case that it is more closely connected to
the law of another country, the rule ofterritoriality does not apply in whole or in part,and a single law shall be applicable to the case asa whole. The law to apply in such case shall be
the law of the country with the closest connection
to the infringement, which is evidenced by (i) the
center of gravity of the alleged infringer’s
business undertaking, as measures and objective
factors, and (ii) the extent of the activities and theinvestment of the right holder. Some laws may be
excluded depending on the degree to which thedesirability of such regulation is generally
accepted as evidenced by the TRIPS andsuccessive international laws. If theses norms do
not supply a rule or if the rule cannot be
ascertained, the law of the forum applies as the
final choice.
The applicable law is also determined interms of individual points of issue, such as theinitial right holder, transferability, and licensing.
(2) Rules drafted by the Max Planck
Institute for Intellectual Property
The Max Planck Institute for Intellectual
Property (MPI), Germany, has also drafted rulesof application of laws. In Europe, the Proposal fora Regulation of the European Parliament and theCouncil on the law applicable to non-contractual
obligations was published. This proposal regards
the law of the country of protection as the law
applicable to IP infringement, which has aroused
controversy on various aspects. It adopts flexible
rules for determining the law applicable to a tort,
allowing the application of the law chosen ex postby the parties concerned, the law of the common
place of habitual residence, or the law of any
country with the closest connection with the tort.
Some people argue that such rules should also be
adopted for IP. The MPI draft is affected by thisargument. It is also affected by the Second
Preliminary Draft of the ALI Principles.
According to the MPI draft, the law applicable
to determine the existence, validity and scope of
property rights shall be, in principle, the law of thecountry of protection. In this respect, the countryof protection refers to the country or countries● 173 ●IIP Bulletin 2005

where the legal claim relating to the existence orvalidity of the intellectual property right shouldtake effect. On the other hand, the law applicable
to determine infringement shall be the law of thecountry or countries where the infringement
occurred as alleged by the legal claim, if theclaimed legal remedies should take effect within or
in connection with such country or countries.
When infringement is alleged in a foreign dispute,the infringement shall be deemed to haveoccurred in the country where the infringement
substantially affects the domestic market. As formoral rights (including moral rights of author),
infringement shall be deemed to have occurred in
the country or countries where the infringement
affects the rights.
When damage is caused in multiple countries
specified in the suit, the law of each of these
specified countries where protection is claimed
shall be applicable. Party autonomy is allowed for
determining the remedies for the infringement,
though the provision is in parentheses. The MPI
draft also includes a presumptive rule for the casewhere the law of such country where protection
is claimed, cannot be determined. Namely, if a
judgment is based on a presumption and theremedies ordered in the judgment are completely
different from the corresponding remedies
stipulated in the country where protection isclaimed, the judgment cannot be enforced.
Furthermore, the MPI draft distinguishes
between infringement occurring in specificmultiple countries and ubiquitous infringement, i.e.
infringement occurring in an unspecified numberof countries. When ubiquitous infringement isalleged, the court shall apply the law of thecountry with the closest connection to theinfringement as a whole. In this respect, the MPI
adopts the two factors for judging the closest
connection, i.e. the center of gravity of the alleged
infringer’s business undertaking as measured as
objective factors, and the extent of the activities
and the investment of the right holder. In the casewhere different countries are determined as thecountries with the closest connection to theinfringement, there are two options. (A) The
country where the defendant has its address shallbe presumed to have the closest connection,
unless the plaintiff successfully proves that
another country has a closer connection; if thecourt cannot determine the country with theclosest connection to the infringement, available
remedies shall be limited to those allowable inproportion to the damage caused by the infringing
act in the country or countries where theinfringing act is prohibited by law. (B) If available
remedies differ in terms of perspectives, theyshall be limited by only allowing injunction
against the infringing act that is directed to thecountry or countries where such act is prohibited,

IIP Bulletin 2005

so as not to extend remedies to the country or
countries where such act is allowed, or bylimiting the amount of damages payable to theplaintiff.
(3) Study of proposed rules
The Second Preliminary Draft of the ALI
Principles combines a rule and an approach into amethod for determining the applicable law. This
characteristic method, which is also seen in theSecond Restatement of Conflict of Laws, is toadopt a clear general rule, while adopting, in
exceptional cases where it is clear that the case ismore closely connected to the law of anothercountry, an approach of determining theapplicable law based on various factors asprovided in Article 6(2) of the Second
Restatement of Conflict of Laws. This is also
adopted in the MPI draft as a method for
determining the law applicable to ubiquitous
infringement. The adoption of such a flexible
method seems to be due to the difficulty in laying
down a clear uniform rule for determining the law
applicable to IP infringement on the Internet.
This method enables flexible determination on acase-by-case basis by judging the closest
connection to the case with various factors, but it
is questionable as it would cause legal instability.
In the case of torts committed in multiple
locations on the Internet, the center of gravity of
the infringer’s business undertaking and the rightholder’s activities and investment might point indifferent directions. The ALI draft adopts the lawof the forum in cases where the applicable law
cannot be determined by this approach. This
procedure is based on the prevalence of nationallaw and cannot be accepted under the philosophyof private international law.
The ALI draft distinguishes between rightsthat need be registered and those that need not
be registered. However, where a company
operates a business on the Internet, it uses
various IP rights in the course of business, suchas indicating its trademark on its website, using
the software for which it has obtained a patent,
and uploading the contents for which it owns
copyright. It seems more desirable to adopt a
uniform rule for all types of IP rights, as proposedby the MPI.
With respect to infringement of rights thatneed not be registered, such as copyrights, theMPI draft adopts a rule of applying the law of any
country where the alleged infringing act has orwill significantly impact the market for the workor subject matter at issue. It is noteworthy that
the MPI interprets the territoriality principle in avery relaxed manner. The MPI seems to adopt
the effect principle, which is adopted in US caselaws for applying regulations under the Anti-Trust
Act. However, such a rule focusing on the effect● 174 ●

is a unilateral rule on conflict of laws fordetermining the scope of application of the law of
the forum, and it should inevitably be criticized as
insufficient as it gives no consideration to thebenefit of applying the law of any country where
the effect occurred. Furthermore, the impact on
the market is an uncertain factor, and it would benecessary to further examine in what case suchan impact would occur and clearly specify thelevel of the infringement or alleged infringer’s
activities that may be recognized as causing theimpact on the market. This approach is similar to
the application of the law of the place of effect,
but it cannot satisfactorily play a role in assuring
free circulation of information on the Internet andpredictability of business activities or providing
for code of conduct in IP disputes. A rule on
conflict of laws relating to IP infringement should
be laid down as a rule that can effectively function
to provide not only remedies for infringement but
also predictability for right holders and code of
conduct. The effect of an IP infringement might
be deemed to have occurred in all markets
accessible or substantially accessible to any
person in the world. In my opinion, in order toprovide predictability of business activities,
coordinate interests of the parties concerned, andassure the development of business on theInternet, the law applicable to an IP infringement
should be the law of the place of act.
The MPI draft, in light of the characteristicsof the Internet, advocates that where ubiquitous
infringement has occurred, or in other words,
where infringement has occurred in an unspecified
number of countries, the law of the country withthe closest connection to the infringement as awhole should be uniformly applicable. The MPI
provides for an optional measure to limit
protection by denying remedies that are notavailable under the law of the country concerned.
Thus, the MPI allows uniform application of asingle law, aiming to solve conflict of laws. In thisrespect, the MPI draft is acceptable.

fields are studied below.

Judgments on the application of laws
relating to IP Infringement on theInternet(1) Patent infringement on the Internet
There was a case in which the U.K. Patent
Court determined the place of infringement,
focusing on the system as a whole including theserver located outside the United Kingdom. The
allegedly infringed UK patent related to thecomputer-based interactive system for authorizedgambling. According to the patent claim, thesystem consisted of a host computer, terminal
computers, communication means for thesecomputers, and a program to operate the terminal
computers. A third party placed a host computer in
the Netherlands Antilles to operate the systemand provided the program for customers in the
United Kingdom. The defendant argued that his
system was not included in the scope of the claims
because he placed the host computer outside theterritory of the United Kingdom. The court
pointed out as follows. A host computer is
indispensable for the claimed invention but where
it is located does not matter, so a conventional
concept of “place” should not be applied in thiscase. What matters is who uses the claimed
system and where they use it. In this case, UKcustomers, intended users of the claimed system,
access the host computer placed by the defendantin the Antilles, by using their own terminal
computers in the United Kingdom. The court,
focusing on the system as a whole, judged thedefendant’s act to be infringing the patent under
the UK law.
As for business model patents, it isimportant to determine where the system isimplemented. In the case of transnational use, if
the media or hardware that records the software
to operate the system in a country is used only
for the purpose of operating the system in thatcountry, such use can be deemed to be infringing
the patent under the national law of that country,
even though part of the system is used abroad. In
the U.S. case, the law of the place of the server
for the centralized management of the system or
the central master server was determined to be
applicable to a tort relating to the system as awhole.

In the patent field, infringement of businessmodel patents and software patents may occur. In
the trademark field, international application of
META tags, framing specifications, and deep
linking may raise problems. In the copyright field,
problems may arise from distribution of digitizedmusic works and cinematographic works (peerto-peer file sharing via MP3, Napster, or KaZaa),
new types of legitimate download services(iTunes, MusicNet, eMusic.com), secondary
liability of the ISP for copyright infringement, anddatabase protection. Infringement cases in these(2) Trademark infringement on the Internet
The case of trademark infringement on theInternet handled by the Federal Court of Canada
related to the mark, Yellowpage, which was in the
public domain in the United States but was
effectively registered in Canada, and the court
acknowledged infringement under the CanadianTrademark Law. In the United States, the mark
Yellowpage is in the public domain, but, in Canada,
it was not in the public domain; in fact, aparticular person obtained a trademark right for it
and established a substantial reputation. The

4● 175 ●IIP Bulletin 2005

defendant was a US company that had mergedwith a Canadian company called Canadian Business
Online. The defendant operated a business under
the name of the Canadian Yellowpages On The
Internet. The plaintiff claimed a provisional
injunction to stop the defendant from using themark Yellowpages on the Internet. As thedefendant did not follow the order issued by theFederal Court of Canada, the plaintiff required thedefendant to appear in court, alleging that thedefendant’s behavior was insulting to the court andthe defendant should explain the reason for
non-attendance. The court held that what could
not be done in Canada ―― using the plaintiff’s
registered trademark via the company based in the
United States ―― could never be done in the
United States. This judgment is criticized because
provisional injunction against the defendant’s act
on the Internet would have a serious impact on the
defendant. The act subject to provisional injunction
may be illegal under the law of the country where
information is received but it may be legal under
the law of the country from which information istransmitted. In light of the borderless nature of theInternet, courts should be careful in issuing
injunction, because injunction might bring about
disadvantages to businesses operating on theInternet and prevent their activities that havebeen recognized as being legal under national lawsof some countries.
This problem is also taken into considerationin the WIPO Joint Recommendation. Those who
use marks on the Internet should regulate thescope of their activities by taking measures tolimit the scope of their business with the use oftechnical means, limit users by requiring
passwords for the access to their websites,
conduct transactions only with specific users byconfirming the users’ address and nationality
before allowing access to their websites andindicate and observe a disclaimer that they trade
only with customers in specific markets. By doing
so, they shall not be liable for infringement
alleged by right holders in other countries. It isan effective measure to encourage individual
businesses to clearly define the scope of activities
so as to avoid liability.
(3) Copyright infringement on the Internet
The US court handled the following case.
iCraveTV.com made signal waves for the Internet
TV broadcasting available to several TV stations.
TVRADIO.Com, a Canadian company that
operated iCrave.com in Ontario, retransmitted,
via the Internet, the signals of the programs andmade them available to cable TV subscribers in
Ontario. Film companies, TV network companies,
and sports leagues, alleged copyright andtrademark infringement and filed a suit at the US
District Court of the Eastern District of

IIP Bulletin 2005

Pennsylvania for provisional injunction to stop
TVRADIO.com from webcasting the programs forwhich the plaintiffs owned copyrights on theInternet. TVRADIO.com argued that the activityof iCrave.com, which was alleged as infringing the
copyrights and trademarks, was legal underCanadian law. Such an act of retransmitting thesignals was recognized as an infringing act under
the US Copyright Law whereas it was notrecognized so under the Canadian Copyright Law.
The court upheld the plaintiffs’ claim for
injunction, holding that the plaintiffs demanded
remedies under the US Copyright Law for
infringement of the copyrights under the US
Copyright Law, setting aside the issue under the
Canadian law. This judgment is also criticizedbecause the court gave no consideration to thetransnational impact of injunction. As thedefendant succeeded in making its argument
accepted that its retransmission was legal in
Canada, the court should have had no option but
to regard the defendant’s act as legal. However,the court judged that it had personal jurisdiction
over the defendant on the grounds that some ofthe defendant’s subsidiaries operated businesses
in the United States, and acknowledged
infringement under the US Copyright Law. The
injunction was issued without respect to theactual circumstances in Canada, and Canadian
courts cannot pass it over. This case suggests thenecessity to achieve coordination with protection
and regulation under the law of the country where
information is received, rather than simply
applying the law of the country from which
information is transmitted.
These cases indicate that the law of the placeof act is generally adopted. They also suggest that
where the law of a country is uniformly applied to
an infringement occurring in another country
where the allegedly infringed object is notprotected or the allegedly infringing act is notrecognized as an infringing act, it is necessary toachieve coordination with legal systems andprovisions of the other country. The MPI draft
adopts a rule for ubiquitous infringement toachieve coordination with legal systems andprovisions of the country where injunction or
punitive damages are not available. Consideration
should also be given to the contents of rights andthe types of infringing acts under IP laws ofindividual countries.
5

Application of Laws Relating to IP on
the Internet

On the Internet, information is transmitted
across national borders, and this raises a question
under private international law, i.e. whichcountry’s law is applicable. While taking into
consideration the difference among national laws

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that exist throughout the world, we should
consider how to solve a conflict of laws inaccordance with the spirit of private internationallaw, with the aim of establishing a desirable ruleof application of laws relating to IP in the future.
If we adhered to the territoriality principle for
IP infringement on the Internet and strictly apply
the law of the country of protection or the law of
the country where information is received as theplace of tort, laws of all countries where
information can be received via the Internet
would become applicable. While international
harmonization and unification have beenproceeding in terms of the contents of IP rights,
protection and enforcement of rights against
infringements, there are still legal areas that are
difficult to harmonize and unify internationally.
Under such circumstances, adherence to theterritoriality principle may still be widely accepted.
However, it requires users to be well versed inlegal systems and provisions of all such countries
and follow very cumbersome and complicatedprocedures for solving disputes. Furthermore, itwould impair predictability of business activities
and free circulation of information on the Internet,
thereby casting a dark shadow over the future
development of the Internet. We should protect
right holders and secure convenience and securityof consumers as appropriate, while ensuring that
entrepreneurs can soundly operate business on
the Internet.
In my opinion, the law of the place of act
should be applicable in principle as the law of theplace of tort, and protection should not be given
if protection is unavailable under the law of thecountry
where
informationisreceived.
Furthermore, if protection is unavailable orinadequate in the place of act, like a copyrighthaven, coordination between the law of the placeof act and the law of the place of effect should beachieved by finding a correctional connection in
the country where protection is available.
The “place of act” should not be limited to
the location of the server, as criticized so far. In
light of the characteristics of the Internet, it isnecessary to specify the “place of act” of theinfringer in terms of function. It should bespecified by flexibly interpreting the place of actof the companies and individuals acting on theInternet and limiting the scope of activities basedon the consumers and markets targeted by thecompanies or the nature of the activities of theindividuals. This approach may be similar to theview to advocate the law of the country where
information is received. However, while theapplication of the law of the country where
information is received would raise the possibility
that the person who transmits information would
be held liable for infringement occurring in any
place that the person could not predict, theapproach of applying the law of the place of act
assures the predictability for such a person as it
gives consideration to the place or region targetedby that person. If the alleged infringer has acted ina copyright haven where protection is unavailable
or inadequate, it is appropriate to find acorrectional connection and apply the law of thecountry where the alleged infringer is located or
the victim has its habitual residence or principal
place of business. Meanwhile, the liability of theInternet service provider that acts as anintermediary for providing information should bedetermined depending on the location of the server.
This rule is also adopted by the EU directive. The
liability of users and the liability of the server
should be determined uniformly under a single law.
Furthermore, in the case where users who have nocontractual relationship with the Internet server
make compressed files with the data of music CDs
and DVDs and upload these files onto websites via
the server, their liability for tort should bedetermined by the law applicable to the server, as
if they used the server. As for the system producer,
the applicable law should be the law of the place
where he has uploaded the software and made itavailable to users, or if it is difficult to specify suchplace, the law of his principal place of business,
which can be regarded as the place where thesystem is produced. Some people argue that thelaw of the place where software is downloaded
should apply, but such argument is unreasonablebecause the system producer cannot predict, at thetime of producing the software, where thesoftware will be downloaded. In the case of
information transmission based on the Peer toPeer technology, which enables the users to
directly exchange information with each other, it isdifficult to specify the place of act because users
conduct two-way communication. Nevertheless, itwould be reasonable to regard the place where
each user involved in the exchange of files islocated as the place of act.
In the case where protection is available in
the place of act whereas protection is notavailable or the allegedly infringing act is notregarded as infringement in the country where
information is received, coordination should beachieved through denial of remedies for the
infringement. Regulations regarding the liabilityof the ISP or server manager and the treatment of
infringement arising from the exchange of MP3
files via Peer-to-Peer systems differ among
countries, and some countries do not have any
regulations or only have unclear regulations.
Regulating file exchange involves rather sensitive
issues such as sound development of Internet
transactions and individual freedom of use of
information. Appropriate rules of conflict of laws
are required to deal with these issues.

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