Overview

Regarding the invention of a system comprising multiple terminal devices connected to a server via a network, the Grand Panel of the IP High Court held that an act of producing a new system consisting of a server located outside Japan and user terminals located in Japan constitutes a patent infringement.

Background

The patent at issue (JP 6526304) in this case was directed to a “comment distribution system” which consists of a server and multiple terminals. In the defendant’s system, files are distributed from servers in the United States to user terminals in Japan. The patentee (plaintiff) claimed an injunction against the defendant’s system and damages, on the ground that the act of distributing files from the server in the United States constitute a production of the system in Japan.

The Tokyo District Court held that the defendant’s system falls within the scope of the present invention but did not determine a patent infringement. The court ruled that based on the principle of territoriality, it is necessary for all the constituent elements to exist in Japan in order that the defendant’s act constitutes a “production” of the system. The plaintiff appealed.

In this case, the IP High Court invited third-party opinion on an act of the “production” in a case where a patent is directed to a system and its server is located outside of Japan, according to the newly introduced system by the revision of the law in 2021. The parties of this case submitted many opinions as evidence to the court.

Summary of the Grand Panel Judgement

The Grand Panel overruled the Tokyo District Court judgment. The important points are as follows:

(1) What is a “production” of a network-based system

“Production” is an act of newly producing a product which falls within the scope of the invention. “Production” of a network-based system invention is an act of newly producing a system by connecting elements which do not fall within the scope of the claim individually through a network so that the elements have a relationship with each other and as a whole satisfy all the requirements of the present invention.

(2) Standards for determining “production” of a network-based system in Japanese territory

Regarding an invention of a network-based system, if it is understood that an act is not deemed as an “implementation” of the patent, based on the reason that its server which is a part of the system is located outside Japan, by strictly considering territoriality, the patent can be easily circumvented by setting up the server outside the country. Under this interpretation, patent rights relating to network-based systems cannot be sufficiently protected.

From the viewpoint of appropriate protection of a patent right relating to network-based system inventions, if an act of newly producing the network-based system is found to be performed in Japan, by comprehensively considering the following factors; 1) the defendant’s concrete action, 2) the functions and the roles obtained by the elements which exist in Japan, 3) the place where the effect of the invention can be obtained by use of the system, and 4)the impact to the economic benefits of the patentee caused by the use of the system etc, the act constitutes a “production” in Article 2 (3) 1 of the Patent Act.

(3) Ruling for this case

In this case, the defendant’s act of newly producing the system is that each file is transmitted from a server located in the United States to a domestic user terminal, and the domestic user terminal receives these files. The transmission and reception of files are performed in an integrated manner and the defendant’s system is completed by receiving each file. Considering the above, it is found that the above transmission and reception took place in Japan.

In addition, the user terminals existing in Japan perform the functions of the constituent elements 1F and 1G, which relate to main functions of the present invention. Furthermore, the effect of the present invention of improving entertainment value in communication by use of comments is achieved in Japan and the use of the defendant’s system impacts on the economic benefit of the plaintiff (patentee) in Japan. Considering all these comprehensively, the defendant’s system is considered to have been produced within the territory of Japan.

For the above reasons, the defendant’s act of distributing files from the server in the United States to multiple terminals in Japan constitutes a patent infringement.