Japanese Patent Covered a US Server - The IP High Court (IPHC) En Banc Decision

Aki Ryuka

Whether a Japanese patent covers an overseas server was litigated in Dwango v. FC2 (IPHC, May 26, 2023) (en banc). The patented system included a server and user terminals. Although FC2, Inc. in the US provided streaming media services with real-time user comments from a server in the US to the terminals in Japan, it was held that FC2 infringed Dwango's patent.

The system was "produced" when the terminal accessed the server.

In the court's analysis, the act of FC2 falls under "production"　(Article 2, Patent Act) of the system and infringes the Patent. “Production” requires a product satisfying all claim elements to be “newly created”. Specifically in this case, “production” occurred once the server and terminal were connected, the user terminal received files from the server, and comments could be overlaid on the video in the browser of the user terminal. At this point, a new system satisfying all claim elements was "newly created."

When the server is overseas, it may still infringe a Japanese patent.

The next issue is whether the production was performed in Japan.

After soliciting amicus briefs, the IPHC provided guidelines. According to the guidelines, even when a part of the elements constituting the system (e.g., the server) exists outside Japan, the following factors should be considered for analyzing whether the production of a network-type system is performed in Japan.

This was the first time amicus briefs were solicited after the amicus brief system was introduced into Japan Patent Law in 2022.

Factors

1. The specific mode of the act

2. The functions and roles in the invention played by the elements in Japan

3. Where the effect of the invention is provided

4. Impact of the use of the system on the patentee's business and

5. Other various factors (The court did not specify what other various factors were.）

Court Analysis

Factor 1: The specific mode of the act

Each file was sent from the server in the US to a user terminal in Japan. Since transmission and reception ("transceiving") were performed simultaneously, and the defendant's system was completed when a user terminal in Japan received each file, the transceiving was considered performed in Japan.

Factor 2: Functions and roles played by the elements in Japan

The user terminals in Japan fulfilled the claimed functions of a determining portion (1F) and a display-position control portion (1G) of the Claim (*), which were necessary to ensure that the comments displayed on the video do not overlap, realizing the primary function of this invention.

Factor 3: Where the effect of the invention is provided

The defendant's system was used domestically in Japan via user terminals, and the effect of the invention, improving the entertainment value of communication using comments, was realized in Japan.

Factor 4: Impact of the use of the system on the patentee's business

The above domestic use in Japan affected the economic interests that the patentee obtained from the domestic use of the invention.

Applying these factors, the IPHC found that the system was produced in Japan. FC2 was found to have infringed Dwango's patent. (The case is currently on appeal before the Supreme Court of Japan.)

Cf. Prior Case

The IPHC rendered another decision over the same parties in July 2022 (Patents: JP 4734471 and JP 4695583).

In this decision, the court found that distributing a "computer program" from a foreign server to a Japanese user infringed the program claim. Furthermore, terminal claims were indirectly infringed because the program was provided only for producing the claimed terminal. However, the court did not find direct infringement of the terminal claim because "producing" the terminal required program installation by the user and was not directly done by FC2.

Recommendations

Obtain system claims.

Consider claiming a system that includes the server and terminal, especially if the terminal alone is not inventive enough. We suggest reciting terminal functions in the claim realized by accessing the server because if the claimed functions of the terminals in Japan are minor, the system might not be considered produced in Japan (Factor 2).

Obtain terminal claims.

Although the IPHC en bank decision found that the system was produced, the terminal can also be found produced. Consider claiming the terminal alone, even if the terminal is just a general-purpose PC or a smartphone, and the invention is implemented only when a specific server is accessed. If the program installation is not required, direct infringement of "producing" the terminal can be found, and it avoids the issue of where the production is performed in Japan.

Consider the distributed nature of the processing.

System inventions often involve processing that is distributed between servers and clients. In response to the court decision, competitors may attempt to avoid infringement by shifting certain functions between servers and terminals. Therefore, we suggest claiming what the system does without reciting what specifically the terminal or server does.

* Claim 1 of JP 6526304

1A.      A comment delivery system having a server and a plurality of terminals connected to the server via a network, wherein the server:

1B.       receives a first comment and a second comment to a video from a user who is viewing the video transmitted from the server; and

1C.       transmits the video and comment information to the terminals;

1D.       the comment information includes:

the first comment and the second comment; and

a comment given time, which is a video play time indicating an elapsed time of the video from a beginning of the video to a point of time when each of the first comment and the second comment is given,

said comment delivery system comprising:

1E.       means for displaying the video and the first comment and the second comment at least partially overlapping the video and moving in a horizontal direction on a display of the terminal in a video play time corresponding to the comment given time based on the video and the comment information;

1G.       a display-position control portion for adjustment such that the first comment and the second comment are displayed at positions not overlapping each other when they are determined to overlap, wherein

1H.       in accordance with the server transmitting the video and the comment information to the terminal, the display of the terminal displays:

the video; and

at the video play time corresponding to the comment given time, the first comment and the second comment at least partially overlapping the video and moving in the horizontal direction in a manner that the first comment and the second comment do not overlap each other.