Learning about Patent Infringement and the Importance of Territoriality from the Dwango vs. FC2 Litigation Case
In the modern global business environment, protecting intellectual property rights is crucial for maintaining a company’s competitive edge. This is especially true in the IT sector, where technological innovation is rapid, and patent infringement issues arise frequently. Companies must understand the concept of patent rights and their scope of application to properly protect their own technology and ideas, thereby securing a competitive advantage.
On March 3, Reiwa 7 (2025), the Supreme Court of Japan drew significant attention when it ruled that Japanese patent rights protection extends to infringement acts by FC2, which hosts its servers in the United States, in the lawsuit between Dwango and FC2.
This article will provide a detailed explanation of the basic concepts of patent infringement, the principle of territoriality, and the case study of the lawsuit between Dwango and FC2. It will also explore how companies should protect their patent rights under Japanese law.
What is Patent Infringement?
A patent is an exclusive right granted to protect a new invention, which is given to inventors or companies that have applied to the Patent Office and passed the examination. Patent holders have the right to exclusively use and sell their invention for a certain period (usually 20 years).
Definition of Patent Infringement
Patent infringement refers to the unauthorized manufacturing, use, sale, or import/export of a patented invention without the permission of the patent holder. If infringement is recognized, the patent holder can claim damages and seek an injunction to stop the infringement.
The following cases can be considered as patent infringement:
- Technical scope infringement: Unauthorized use of technology that falls within the scope of the patent claims.
- Infringement by equivalence: Use of technology that is substantially the same as the patented invention.
- Indirect infringement: Providing parts or materials for the use of the patented invention, which constitutes infringement.
The Significance of Territoriality in Patent Law
Territoriality means that patent rights are granted based on the laws of each country and have effect only within the territory of that country. For example, a patent obtained in Japan is only valid within Japan and does not have effect in other countries.
The principle of territoriality in patent rights has the following impacts on business:
- Need for patents in each country: Companies expanding globally need to obtain patents separately in each country.
- Limited enforcement of patent rights: Even if a patent is valid in Japan, it cannot directly address infringements occurring abroad.
- Risk of international litigation: Businesses operating across multiple countries need to understand each country’s patent laws and manage risks accordingly.
Applying Territoriality in the Dwango vs. FC2 Litigation Case
In two lawsuits concerning whether the acts of U.S.-based FC2, which provided similar services via overseas servers, infringed upon the patent rights of Dwango Co., Ltd., the operator of the video streaming service “Niconico Video,” the Second Petty Bench of the Supreme Court of Japan on March 3, Reiwa 7 (2025), made its first decision that such acts constituted an infringement.
Background of the Litigation
Dwango Co., Ltd. is the operator of “Niconico Video” and possesses patented technology for a comment display feature. On the other hand, FC2 operated a video streaming platform with similar functionality via servers located overseas.
Key Issues in the Litigation
FC2 provided services to users in Japan from video streaming servers established in the United States. In response, Dwango filed a lawsuit claiming that “as long as the service is provided within Japan, Japanese patent rights should be applied.”
Judgments of the Intellectual Property High Court and the Supreme Court
The Intellectual Property High Court made the following judgments in its decision:
- Even if the servers are located overseas, if the service is provided within Japan, Japanese patent rights are applicable.
- The court recognized that FC2’s service infringed upon Dwango’s patent.
On March 3, Reiwa 7 (2025), the Supreme Court of Japan dismissed FC2’s appeal, confirming Dwango’s victory.
The Impact of Court Decisions on Corporate Activities in Japan
Under the principle of territoriality, patent rights are granted based on the laws of each country, which necessitates that companies acquire patents in every country where they operate and carefully consider the possibility of exercising those rights in each jurisdiction.
In the recent litigation case between Dwango and FC2, despite FC2 having servers overseas, the provision of services within Japan was deemed significant, and the application of Japanese patent rights was recognized. This decision underscores the importance for companies to not only obtain patents but also to understand the legal interpretations of the countries where those patents apply and to construct their business models accordingly.
Particularly in the realm of internet-based services, where not only physical locations but also the residency of users and the reality of service provision are taken into account, an international perspective is essential when formulating patent strategies. Companies are required to take measures to maximize the use of intellectual property rights within the framework of territoriality and secure competitive advantages.
Conclusion: Consult Experts for Your Intellectual Property Strategy
Understanding patent infringement and the principle of territoriality forms the foundation of a company’s intellectual property strategy. In particular, the litigation case between Dwango and FC2 indicates that the scope of territoriality is expanding. Companies operating globally need to adopt flexible yet robust responses based on the patent laws of each country.
To adequately protect their intellectual property and maintain competitiveness, companies must re-acknowledge the importance of patent strategy and ensure thorough risk management. It is advisable to consult with professionals such as attorneys for intellectual property strategy, to receive advice based on the latest case law and other relevant considerations.
Guidance on Measures by Our Firm
Monolith Law Office is a law firm with extensive experience in both IT, particularly the internet, and legal matters. In recent years, intellectual property rights such as copyrights and patents have garnered increasing attention, and the necessity for legal checks has grown accordingly. Our firm provides solutions related to intellectual property. Please refer to the article below for more details.
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