One of the main considerations when filing an application for a patent is where to seek protection. If the application proceeds to grant in a country, then the patentee will be able to enforce their rights and prevent others from using the invention anywhere within that country. The other side of this principle of territoriality is that a patent is only enforceable in a territory in which it has been granted. For example, a patent in the United States could not prevent someone from working the invention in Canada.
These lines start to blur considerably when only a portion of an invention is performed in a territory. For example, suppose a patent granted in a certain country protects a method of two steps. If only one of the steps is performed in the protected country, then the patent may not be infringed. This is a problem for many inventions using distributed computer systems, because the servers implementing those systems may be located in multiple jurisdictions. Even though end users are located in a jurisdiction covered by a patent, the servers may be outside.
Two recent Japanese Intellectual Property High Court (IPHC) decisions however have reduced this problem with regard to Japanese patents.
Specifically, in July 2022, a case was brought by Japanese entertainment company Dwango against FC2, the third most popular video hosting service in Japan. Dwango alleged that FC2 were infringing their patents in Japan. The patents in question were related to a computer program for overlaying comments on a video while it was being watched. This case was brought to the Tokyo District Court in Japan, however, FC2 argued that as its servers were in the US, the computer program that was distributed to users in Japan did not infringe the patents because the invention was worked outside of the territory. After an initial ruling in favour of FC2 and an appeal by Dwango, the IPHC ruled in favour of Dwango instead, with a thorough analysis on whether or not, from a "substantive and overall viewpoint", the invention could be determined to have been performed in Japan. This ruling meant that patents for computer programs could not be easily circumvented by providing the computer program from outside of Japan.
The above ruling on its own was revolutionary. However, the IPHC has recently released another ground-breaking ruling in a follow-up case brought by Dwango against FC2. This time, the patent that FC2 was alleged to have infringed was for a computer system, and in particular, a server that caused the overlay of comments on a video rather than a computer program. The main difference between a computer system and a computer program is that a system comprises physical components. Therefore, the threshold to show infringement was expected to be higher, as it is quite clear cut if a device is located within a territory or not. As before, the Tokyo District Court ruled in favour of FC2 and Dwango appealed to the IPHC. Surprisingly, the IPHC once again overruled the Tokyo District Court, and in doing so set out a list of factors to consider:
- The specific manner of the act,
- the function or role played by the element existing in the country of the invention,
- the place where the use of the system will have the effect of the invention, and
- the impact of the use of the system on the economic interests of the patentee.
Additionally, the IPHC considered third-party opinions for the very first time in the making of their decision. This ruling is a welcome stance for many patent right holders, as it means that patents for computer systems cannot be exploited trivially in Japan and provide the protection that would likely have been envisaged for them in the first place. With the ever-growing number and importance of computer-related inventions, it will be interesting to see if any other major jurisdictions make similar rulings to increase the protection offered by such patents (some countries, such as the UK, already provide such protection). In the meantime, these cases should also highlight the importance of carefully selecting territories when considering IP strategy, and the differences in scope of protection that may be available in each one.
With thanks to Itoh International Patent Office for providing a case outline in advance of the official judgement summary.