September 11-12, 2000
San Francisco, CA

Cross Border Issues in Copyright and Trademark Law: Basics and Recent Developments

Naoki Koizumi
Professor of Law
Sophia University
Faculty of Law
Tokyo, Japan

First of all, I thank Directors Katoh and Day for inviting me to this significant Conference, Jurisdiction II. It is a great honor to me. I believe, even in the Internet era, the best way to achieve a mutual understanding is to meet and talk face to face. My presentation focuses on the scope of territorial principle in Japanese Intellectual Property Laws.

Territorial Principle (TP) in Intellectual Property Law

Intellectual Property Law has been dominated by territorial principle. TP has two legal usages. First, the territorial scope of any IP law of a country shall be limited to the border of that country. Unauthorized use of patented invention abroad will not be an infringement of the domestic right.

Second, TP designates the law of the country where the protection is sought as the applicable law to the infringement suit. TP is, in other words, a conflict-of-law rule. Mostly the protecting country is the country of the court. But, this will not always be the case. The protecting country, will not always mean the country where the infringing suit is raised. Tokyo district court might apply the U.S. patent law to a case, involving a patent of an American inventor, alleged to be infringed by a Japanese firm.

TP might lead to unjustifiable results. Japanese college students, using an amazingly efficient MP3 file search engine distributed from the server abroad, reproduce musical works without permission by the rightholders. The downloading shall be itself an infringement of the Japanese copyright law. But, it is almost impossible to enjoin each downloading done at home or in the college computer center in Tokyo.

By distributing the search engine software or system, the company abroad might be held as a joint tort feasor or a contributing infringer. The problem is, the server that transmits the software is located abroad, i.e. the alleged infringing transmitting act is done outside the boundary of Japan, therefore, TP will normally exempt the foreign company from liability. Is that a fair result ?

Rationale for Territorial Principle

What is the rationale for TP ? Why does it exist ?

TP is among the first principles of International Intellectual Property. Strangely enough, to locate the rationale for TP is not an easy task. Like many other countries, we find no express provision stating TP in the Japanese trademark or copyright law.

First of all, where is TP stated ? It is fair to say, at least for industrial property including trademarks, international agreements, too, only vaguely refer TP. The first candidate is the independence of each country's intellectual property rights from the other countries' stated in the Paris (Art. 6 (3)) and the Berne (Art. 5 (3)) Conventions.

Even though the international agreements, including Paris, Berne and the TRIPs, have achieved remarkable harmonization of the substantive level of IP protection among the member countries, there still remains unique provisions which represent the cultural-industrial policy of each country, for instance, droit de suite, folklore rights. The principle of independence takes that kind of peculiarities for granted.

But I must say the independence principle offers no explanation for TP.

The two are independent notions. Suppose trademark law of country A reaches extraterritorially an unauthorized use of a registered mark abroad. As far as the law of A defines the scope of territorial application of the law A, the law A is independent from others. Nonetheless, such extraterritorial application will not be inconsistent with TP.

The second possible explanation will be National Treatment stated in the Paris (Art. 2) and the Berne (Art. 5 (1)) . Late Professor Friedrich Karl Beier at the Max-Planck-Institute for IP in Munich was the most famous advocate of this theory, and many other scholars have supported it. But this theory is not well-grounded, too.

National treatment, only obliges each member country an equal treatment between domestic people and foreigners. Suppose the Japanese Patent Law is amended, and it applies U.S. Patent Law both to Japanese and American patent holders. National Treatment will allow this amendment. But TP will not, as far as U.S. law applies to infringement occurred in Japan. In this connection, the Japanese Supreme Court has only stated, Territorial principle is a conflict-of law principle and cites no concrete statutory provision (1).

On the other hand, we could find a more plausible explanation for territorial application of copyright law. Article 5 (2) of the Berne Convention designates the law of the country where the protection is sought to be applied to consider the copyrightability and scope of protection of a work. This provision is not perfectly clearly articulated, but we might read this paragraph as follows; the law of the country where a use of copyrighted work, for example, unauthorized downloading, broadcasting occurred is the law to be applied. And this will explain TP.

Then, what is the rationale ?

One could trace the origin of TP back to the sovereignty of King and Queen. Patent monopoly reached only domains the King ruled. It is true, even today, patent law and copyright law reflect the industrial and cultural policies of a State. In other words, this rationale will regard IP laws as exercise of sovereignty of that country, like tax and criminal laws (public laws in continental usages) , rather than private property law. From this characterization it could follow that, IP laws are totally exempted from conflict of law rules.

This seemingly extreme attitude has been recently supported by Tokyo High Court (2) . The defendant is a Japanese firm located in Japan. The firm is alleged to contributory infringe U.S. patent by exporting to a U.S. firm in the states directly infringing the patent. The defendant may, under U.S. patent law Sec. 271, which explicitly reaches contributory infringement occurred abroad. Tokyo High Court, admitting jurisdiction, denied application of the U.S. law and dismissed the plaintiff's injunction claim. Tokyo High Court reasoned , patent law applies territorially, therefore, the plaintiff could not raise injunction suit under the U.S. law before a Japanese court.

The court seemed to deny the application of a foreign patent law totally. One might advise the plaintiff, go to the U.S. court. It's not always practical for a Japanese plaintiff owing U.S. patent who finds difficulty in expensive legal proceedings before a U.S. court.

Scope of territorial principle under Japanese IP law

Now let us turn to the scope of territorial principle under Japanese law. The Japanese trademark law has provision for indirect (contribute) infringement. Unlike the U.S. law, the Japanese law is silent whether a contributor abroad is also an infringer or not. So far no case has been reported on this point. From a recent Tokyo District Court decision (3), we might infer a general reluctance to extraterritorial application of IP laws. Pointing that extraterritorial application of patent right conferred by the U.S. Patent Act contradicts public policy of Japan (TP), the court denied application of the U.S. Patent Act Sec. 271 to a case involving an instigation done by a Japanese firm. Compare to the High Court case mentioned above, the district court followed a normal conflicts analysis first, then it chose the U.S. law as applicable one, nonetheless, the conclusion was denial of the application of a law with extraterritorial application.

I suggest, with many colleagues in Japan, an extraterritorial application of IP law to a contributory infringement abroad. First, the Japanese IP laws have no definite provision that limits the territorial reach. TP only dates back to traditional concept of King's dominion. Second, there exist cases where an infringement act consists of a series of doings across the border. As far as these are deemed to be one set of infringement, it is absurd to forget sometimes most vicious one done abroad.

Conflicts Analysis in IP cases

Assuming TP, then, which is the law of the protecting country? This is an easy question in most cases. For example, the country where a counterfeit software is made, or the country where a luggage bearing fake trademark.

Satellite broadcasting is a more complicated case. An act of broadcasting begins with transmitting (uploading) the radiowave to the satellite, and ends with receiving the wave from the satellite. There are two options for the protection to be sought. The transmitting country and the footprint country. The EC Satellite and Cable Directive of 1993 has, after a long debate, chosen the law of the country from which the wave is transmitted as the protecting country. Between countries having relatively well harmonized copyright statutes, like EC, it will not make a big difference under whichever law the clearance of copyright is executed.

One may take advantage this rule, though. Transmitting from a copyright-haven country will save license fee. Unauthorized broadcasting will damage the economic and moral interests of the rightholders in the country where the audience watch the TV, never the people living in the country where the rocket has been launched. I suggest the protecting country for satellite broadcasting shall be the footprint countries.

The more difficult is internet. My theory (actually Ex-Director Bogsch's) will lead an impractical result, that one must be world-widely authorized before he or she uploads the content to the internet. When we adopt the EC Directive theory above, only to locate the server and ask the rightholder will vanish the concern for infringing. In Japan, discussion is ongoing.

As for trademarks, similar problem exists. Japanese company A would use a registered trademark, and ask the permission by the Japanese right holder. She might be accused to be an infringer by a rightholder abroad, who has the right to the same mark of that country. Shall we require the company search and clear every trademark rights in the world ? Or, is that fair, one could be exempted from liability after he has cleared the trademark rights in those countries where the most people understand the language in which the website is written ? The problem is, for websites in English or in Chinese , unlike Japanese, this will not be a big comfort for would-be users.

To wrap up: First, to treat an act of contribution abroad as a part of domestic direct infringement will not contradict with TP. Second, the protecting country shall be the country where damages resulting from the infringement occurs. That may include every footsteps in the cyberspace, but reasonable limitation is to be allowed as far as the user has taken reasonable steps. For trademarks, language might be a clue.

Thank you for your attention.