SUICA scandal and the privacy in the era of Big Data

Recently, East Japan Railways Company (JR), oneof the biggest companies in Japan apologized for the sales of the data of its consumers. 

JR manages a system of electronic money called SUICA, which started from an electronic ticket for JR’s trains but now is one of the strongest electronic money widely used all over Japan. 

Recently, JR announced that JR and its partner company would sell the marketing report based on the data of SUICA users on (1) which station they get on and get off, (2) when they used the train, (3) how old they are, and (4) their gender.  For this purpose, JR gives the anonymized data of SUICA users to its partner company.  At first, JR got no consent from the users. There was no opt-in nor opt-out for the sale of their data.  When the announcement was made, there are many people opposing the usage, claiming that the sales of user data are an invasion of users’ privacy.

From the viewpoint of the Act on the Protection of Personal Information, which aims to protect personal information, JR may make an argument that it is not violating the Act. The act generally prohibits the transfer of personal information without obtaining the consent. But it is understood that the personal information defined does not include the anonymized information.

However, the fear of the users is that, many people are now using SUICA as their primary means of payment (partly because of SUICA point system whereby some percentages of the purchase are refunded), the log of the SUICA usage is a kind of life-log.  Whereas SUICA data can include sensitive information such as the purchase of certain kinds of books and magazines, it is sometimes possible to identify an individual by a sophisticated analysis of the life-log like data. Finally, JR apologized and offered an opt-out procedure.

It reminds me of the sentence in Viktor Mayer-Schonberger’s recent book “Big Data.” The book argued that the current concept of privacy is out of date in the era of Big Data. At least, one lesson is that companies dealing with Japanese customers which are collecting life-log like data ( including electronic money), must be very careful about its reputation risk when they “sell” user’s information even if they are anonymized.

DISCLAIMER: "IT Law issues in Japan" only provides general information about Japanese information technology law and does not, under any circumstances, constitute legal advice. You should first obtain the advice of professional legal counsel who is qualified in Japan before acting or refraining from acting based on this blog.

Scanning Books and Copyright Law

In the United States, scanning books is becoming popular. Google Book project and its litigation has been an important topic of discussion. There are some services such as 1DollarScan which provides a scanning service for people who hate the burden of DIY scanning. In the U.S., scanning and copyright are discussed in the context of fair use. However, Japanese copyright law has no fair use clause. 

The most relevant clause is the Private Usage clause which excludes the individual's private reproductions from infringement (Article 30). But, it is questionable whether this clause is applicable to a third party scanning business. I believe that if a mother asks her son to scan a book for her own private usage, this would be lawful because of the private usage clause, as the son is deemed to be the hands and feet of his mother. However, it is not clear whether a third party business can be regarded as such and the answer might be negative.  There is no court opinion on this point. 

Last year, famous novel writers and manga artists including Jiro Asada, Keigo Higashino, Kenshi Hirogane, and Son Buron filed lawsuits against two Japanese scanning businesses. However, one of the defendants voluntarily acknowledged its responsibility and the other abandoned its business and the plaintiffs dropped the lawsuit. As a result, no court opinions were rendered. 

A recent new movement in this situation is the establishment of My Book Digital Council last month. This is a council to establish a rule on book scanning and a scheme of licensing for the reproduction (scanning) rights of a scanning business. What is important is that three of the four main founders of the council are on the rights holder's side: The Japan Writers' Association, Japan Photographic Copyright Association, and Japan Cartoonists Association. This initiative of the rights holder for the convenience of consumers itself should be positively evaluated. This will increase the convenience of the users especially because many Japanese people live in a very small apartments. (I used to live in an apartment less than 100 sq.ft.)   

However, the main question should be the concrete contents of the scheme. For example, the council implies that the copyright holders who agree with the scheme should charge a license fee to the scanning business. But if the license fee is too large, there might not be anyone wishing to use the scanning service. In addition, if the license given is a voluntary license, there still are problems determining whether the licensor is the owner of a particular work. (This can become complicated if a copyright is owned jointly, the work is a part of compilation, or the work is a derivative work.) If the system is complicated and needs a lot of time and money, the system would again not be widely used.  One possible scheme is a compulsory licensing system where the scanning business may scan any work they want as long as they pay (or deposit) a certain amount of money which is enough to incentivize the authors yet cheap enough to enable the scanning business to offer reasonable prices for the customers.  

Yet another important issue might be whether "scanning" is the best method of achieving the same convenience.  Some may argue that attaching a digital file with a paper book and promoting the sales of digital books might be better than promoting scanning.   In any event, I believe that the topic of scanning books is very interesting.

DISCLAIMER: "IT Law issues in Japan" only provides general information about Japanese information technology law and does not, under any circumstances, constitute legal advice. You should first obtain the advice of professional legal counsel who is qualified in Japan before acting or refraining from acting based on this blog.

Parallel Import and Copyright Law

As the Internet has made international transactions easier, there are more and more issues of importation and IP. On March 19, 2013, the US Supreme Court made a new ruling on parallel importation (Kirtsaeng v. John Wiley & Sons, Inc). This is a new opinion on whether or not the First Sale Doctrine (roughly, the doctrine that once a rights holder sells the product embodying the copyright, it cannot control the resale of the product in the secondary market) is applied to international sales. Now, in Kirtsaeng, the U.S. Supreme Court said 'yes' and found that the importation of textbooks produced in foreign countries is acceptable because of the combination of 17 USC 602(a)(1), 106(3), and 109(a). This post is not to explore the potentially intriguing tension between copyright owners and users/consumers on Kirtsaeng but instead to explain briefly the Japanese regulation on parallel importation.  

The controversy in the US has been brought to the Supreme Court because the statutory provisions are vague and ambiguous on this issue. In contrast, in Japanese Copyright law, the international application of First Sale Doctrine is stipulated by the law.  Article 26-2 (2)(v) of the Japanese Copyright Act stipulates the exemption of exclusive rights for distribution in the case when "the original or reproductions of a work the ownership of which has been transferred outside this country, (a) without prejudice to a right that is the equivalent to the rights for distribution, or (b) by a person who has a right equivalent to the rights for distribution or by a person with authorization from such a person."  This means that when a Japanese rights holder licenses production/sales of products in a foreign country like Thailand (as in Kirtsaeng), the rights holder cannot control the secondary distribution of the licensed product even within the territory of Japan. (Note that there are IP Laws other than Copyright Law which may prohibit parallel importation.)  

One important exception is commercial records/CDs. Although there is a lot of controversy on the policy over this exception, basically, the idea is that if Japanese contents business wants to go out to Asian or other international markets and sell Japanese songs, then there would be some people selling a cheaper foreign version of the same song in Japan and avoid liability under Article 26-2 (2)(v). The Japanese music industry claimed that such possibilities would hinder the music industry from actively selling Japanese music abroad. As a result, in 2004, by the amendment of the Copyright Law, Article 113(5) was installed which (partially) prohibits the import of "a commercial phonogram that is the same as said commercial phonogram for domestic distribution and yet which is intended for distribution exclusively outside this country." Although there are many restrictions such as the exception being only applicable when the conduct unreasonably adversely affects the profits of the rights holders, I will not go further into these technical issues here.  

In short, many of the problems regarding the First Sale Doctrine which are dealt with by the court interpretation in the U.S. are resolved by the Congress in Japan.

DISCLAIMER: "IT Law issues in Japan" only provides general information about Japanese information technology law and does not, under any circumstances, constitute legal advice. You should first obtain the advice of professional legal counsel who is qualified in Japan before acting or refraining from acting based on this blog.

Legal Analysis on Killing Internet Services

On the Internet, many services appear and fade away everyday. For example, the recent killing of Google's Reader service caused controversy. Also, in Japan, many terminations of Internet services have been rigorously debated. For example, when Rakuten started focusing on Kobo, it closed down the eBookstore it had been managing  called Raboo. This means that the users of Raboo who downloaded books can lose everything if the disk breaks or somehow the data in the local drive is lost (Had the service continued, the users would have been able to download the same book again for nothing in such a case.). Although Rakuten made some mitigation effort such as offering a 10% discount for Kobo store, some people criticized Rakuten's conduct.

What should the companies think of when terminating their services? I believe that there are three issues.

First, they should consider whether the service is an accumulation of a one time contract or a continuous contract. A typical example of the former is a brick-and-mortor bookstore. Closing down one of the branches would not cause many legal problems with customers. But if the service is based on a continuous contract, such as an Internet connection service contract, it is more problematic than the former case. Although some Internet services are located somewhere in the middle, this approach can work as a starting point of the analysis.

Second, companies should check their terms of service. If the terms enable the company to unilaterally end the service, the company has a stronger case. However, in BtoC contract, the Consumer Contract Act is applicable and the terms unilaterally impairing the interests of consumers can be nullified by the court. Article 10. Especially in the case of a pay-for service (not free), although it depends on case-by-case analysis, the court might nullify the unilateral termination clause, or only validate it when the company has reasonable grounds for termination. Also, although there is no Japanese precedent, it should be noted that click-wrap terms of service are more likely to be enforceable than browse-wrap. 

Third, companies should consider mitigation efforts. Although there are no precedents in the context of Internet service, the courts rely on mitigation efforts of firms when they deny users' claims for compensation for damage because of unilateral termination of services (See. e.g., an unreported court opinion of Tokyo District Court on May 31, 2005.) The mitigation efforts can be recommending alternative services, monetary compensation, and/or taking a reasonable notice period before termination. The mitigation efforts are not only legally important but also they will protect the company's reputation, especially if the companies want to continue their prospering service and shut down only services in the red.

Although the legal analysis should be conducted on a case-by-case basis, I understand both the ever-changing nature of Internet services and "expectation" (Note that by saying "expectation", I am not focusing on whether it is legally protected or not, but rather focusing on the intuitive expectation users would have. ) of users on their favorite service and thus the balance between the two would be very important.



DISCLAIMER: "IT Law issues in Japan" only provides general information about Japanese information technology law and does not, under any circumstances, constitute legal advice. You should first obtain the advice of professional legal counsel who is qualified in Japan before acting or refraining from acting based on this blog.

Keyword Purchase and Trademark Law

Whether one can "buy" a third party's trademark as a keyword for Google Adwords (R) is a controversial topic in the trademark law. Let me give you a context. You have an aunt, Aunt Terry who makes great apple pies. You start a shop "Aunt Terry's Apple Pies" and it is successful. But one day, when you googled "Aunt Terry," "Uncle Sam's Apple Pies - Best in Town" appeared! Apparently, many people who searched for Aunt Terry's Apple Pies were attracted by this ad and went to Uncle Sam's shop instead of yours. I believe it is natural at least from your perspective that you would want to stop it. However, in Japan, one court said "OK" to Uncle Sam, at least when the advertisement itself does not use your trademark. Saido v. Onrado, Osaka District Court on September 13, 2007 (unreported).

This is a battle between healthy food sellers. The plaintiff registered a trademark for "CaricaCelapi," which is a healthy product made from papaya. The defendant bought the keyword "CaricaCelapi" from Yahoo Japan and whenever a user inputs "CaricaCelapi" to search, the defendant's advertisement is shown, indicating that the defendant sells healthy food made of papaya. The plaintiff sued the defendant for trademark infringement. The court denied, finding that defendant's advertisement does not constitute a "usage" of the plaintiff's trademark.

There are three important points. First, Japanese Trademark Law lists eight categories of "usage." Article 2(3). The most relevant is putting the trademark on an advertisement. Article 2(3)(viii). The court seems to believe that as the trademark itself is not included in the defendant's advertisement, the plaintiff's trademark is not "on" the defendant's advertisement and therefore there is no infringement.

Second, the plaintiff is apparently not good at arguing this line of argument. The court mentioned that there is no explanation from the plaintiff why the keyword purchase is "usage."

Third, the court ruled nothing about the cases where the keyword is actually displayed within the advertisement. For example, if Uncle Sam advertises "Pay Less for Aunt Terry's Apple Pies!" that might constitute an infringement.

As this is just a lower court case, it is difficult to assess how persuasive this opinion is. However, if a trademark owner wants to win, she should persuade the court that the purchase of her trademark as a keyword somehow constitutes "usage."

DISCLAIMER: "IT Law issues in Japan" only provides general information about Japanese information technology law and does not, under any circumstances, constitute legal advice. You should first obtain the advice of professional legal counsel who is qualified in Japan before acting or refraining from acting based on this blog.

Manipulation of User Created Contents

The user created contents are, especially in the context of reviews or comments of products or services, becoming more and more important. Before deciding which restaurant to go to, we check Yelp reviews and may also google the name of the restaurant to find user reviews on the restaurants. Many people seem to feel that user created contents are more reliable than the advertisements that companies create.

However, that is not always true. One of the most famous American examples of this sort is the Amazon paid review scandal where some review writers seemed to have received money for positive reviews.

Similar manipulation of a user created contents scandal happened twice last year. Around the beginning of the year, one famous review site for restaurants similar to Yelp called "Taberogu" was attacked by the mass media because more than thirty entrepreneurs offered to make up a positive review in Taberogu for restaurants and get paid in return. Japanese mass media called this technique "stealth marketing" (named after stealth aircraft).

Also, some famous entertainers in the Japanese show-biz world recommended an auction service on their blog, saying they could successfully bid for precious goods at a surprisingly low price. It would not have been problematic if they had actually successfully bid for the goods, but at the end of the year, it was revealed that they never engaged in bidding and just posted a fake picture of the auction site about winning the bid and received a lot of money in return. These stealth marketing scandals cast doubt on the assumption that user created contents are more reliable than company ads.

According to the amended guidelines by the Consumer Affairs Agency on the Act against Unjustifiable Premiums and Misleading Representations on B to C advertisement online, a substantial manipulation of the ranking by paying for positive reviews is likely to be a "fraudulent representation" prohibited by the Act. Also, it is likely that advertising through blogs by the auction site stating that people can buy things cheaply when they actually cannot would also constitute a fraudulent representation. But this is a matter of where to draw the line. It is difficult to say that all paid reviews are a "fraudulent representation." One example that is unlikely to be a "fraudulent representation" is if users are asked to upload a review of whatever contents (irrespective of positive, neutral, or negative) and promise to give them a discount in return. Where we should draw the line? This is a difficult issue to be clarified by the accumulation of court opinions.


DISCLAIMER: "IT Law issues in Japan" only provides general information about Japanese information technology law and does not, under any circumstances, constitute legal advice. You should first obtain the advice of professional legal counsel who is qualified in Japan before acting or refraining from acting based on this blog.

Japanese Venture Company Defeated by Trademark Law

When a start-up launches a new business, it is usual in the United States to consult a lawyer. However, in Japan, this may not be true. A Japanese venture company affiliated with Tsukuba University called BearTail announced its new service called "Amazon Gacha" (or Blind Purchase at Amazon).

The original business model might be good. Japanese people love the "heartbeat" of a blind purchase. One of the best examples is "lucky bag" which is very popular among Japanese in the new year sales. Virtually every shop offers a lucky bag where customers do not know what they are purchasing. One of the most notable example is the lucky bag of Apple Store where one man waited for eight days (from Christmas!) to purchase the bag.

The business model of BearTail's new business is that they offer a similar experience every month from Amazon. They offer the users who pay 5000 yen (around $50) a month, the chance to receive a "secret" Amazon box, where popular items equivalent to 4500 yen (around $45) are contained. BearTail gains the margin of 500 yen (around $5) per month for its system to randomly choose popular items which may make the users become jubilant. This is a kind of  "value adding intermediary" model in online shopping.

However, it looks like that they did not ask for a legal advice in deciding the name of its service. In Japan, like in many countries, the third party's usage of a trademark "similar" to the registered trademark is prohibited. Although Amazon (Japan/US) did not register the "Amazon Gacha" trademark, the trademark BearTail is apparently similar to Amazon's famous trademarks such as "AMAZON" or "Amazon.com." [Note that Gacha is a "standard" word for a blind purchase originally from a vending machine, usually for toys, but now is widely used to represent a blind purchase of any sort.] Also, there would be an additional problem of unfair competition.

Because many have criticized BearTail for using a confusingly similar trademark to Amazon without a license, BearTail wrapped up its business of Amazon Gacha within four days after the press release. If a "qualified" Japanese lawyer or a qualified patent lawyer was asked for advice, she would definitely have advised against the service. Of course, this does not mean that a lawyer would hinder BearTail's business. There are many techniques to realizing the business model with much lower legal risks such as changing the name to "Online Gacha" or "Gacha Delivery." It is best for a Japanese venture to consult with a qualified lawyer on many issues including the trademark before launching a new business. It is regretful that this kind of interesting new business failed because of a lack of legal advice. This case reminds everybody in the field of Japanese venture business of the significance of obtaining prior legal advice.

Finally, some people pointed out that a law firm group which boasts to have supported 74 companies for IPO is named as BearTail's "legal advisor" and state that the company must have asked for legal advice. I definitely do not think so. If there is a qualified lawyer in Japan who gave the go ahead for this apparent infringement, it means that the Japanese qualification system for lawyers is malfunctioning. I believe that the business was launched without obtaining any legal advice and after the criticism, BearTail consulted with the legal advisor who strongly urged them to finish the business because of the high possibility of a trademark infringement. However, I am not perfectly sure because the law firm who was named as their legal advisor has so far not explained anything publicly on this issue.

DISCLAIMER: "IT Law issues in Japan" only provides general information about Japanese information technology law and does not, under any circumstances, constitute legal advice. You should first obtain the advice of professional legal counsel who is qualified in Japan before acting or refraining from acting based on this blog.

Starting "Vinyl Vault" in Japan

A recent article by Glenn Fleishman on a new digital music service called Vinyl Vault is interesting to those interested in copyright issues. Amoeba launched the new service on which it claimed to have spent six years and around $11 million. Fleishman claims that although Amoeba pretends that orphan works can be digitized without a license as long as Amoeba retains the profit at an escrow, "[t]here's no such provision in copyright law for such an exemption, and Amoeba could find itself in real trouble." 

This blog article will not discuss whether Mr. Fleishman's argument is correct. Rather, I want to explain what Amoeba or another company should do if it wants to establish a similar business in Japan. 

Curiously, in Japan, there is such a provision in Copyright Law. 

Article 67 (1) Where a work has been made public, or where it is clear that it has been offered to or made available to the public for a considerable period of time, the work may be exploited under the authority of a compulsory license issued by the Commissioner of the Agency for Cultural Affairs and upon depositing on behalf of the copyright owner compensation the amount of which is fixed by the Commissioner as corresponding to an ordinary rate of royalty, in the case, designated by Cabinet Order, where, after the due diligence, the copyright owner cannot be found for the reason that he is unknown or for other reasons. 

Article 67(1) introduces the compulsory license system in which an orphan work can be licensed by the Commissioner of the Agency for Cultural Affairs. Of course, this happens only if the copyright owner cannot be found "after the due diligence." In such case the license fee is designated by the Commissioner as corresponding to an ordinary rate of royalty.

As of January 26, 2011, there have been 82 cases where the Commissioner granted a license. Some of the most notable usage is by the National Diet Library ("NDL"), where the Commissioner granted the license of 67,193 works for NDL's project called "Digital Archive from Meiji Era" on December 2010.
Currently, to meet the due diligence requirement, the Agency for Cultural Affairs requires five kinds of research: (1) research by the name of the author, (2) research on the publishers, (3) post a request for information on your website and obtain a link from CRIC's website for searching for the rights holder, (4) inquiry to the academy or author's guild, and (5) inquiry to the entities conducting copyright management business. (In the case of music, JASRAC is the Japanese equivalent to Harry Fox Agency, BMI, ASCAP, SESAC, and Sound Exchange.)

The due diligence requirement is actually burdensome. For example, Mr. Tanaka from NDL explained that for the Digital Archive from Meiji Era, NDL made inquiries to around 3,000 organizations and the cost was 260,000,000 yen (about $2,600,000) which is about several thousand yen (around thirty to fifty dollars) for one book. 

However, the due diligence requirement is nevertheless essential, because the law does not want the unjust situation where a person who knows the existence of the rights holder (or who can easily know the rights holder) ask for the compulsory licensing and obtain the license against the will of the rights holder. 

I think that a business similar to Vinyl Vault can be launched in Japan based on the compulsory licensing by the Commissioner. But because of the burden of due diligence as explained above, there is a question of profitability. However, as Amoeba paid $11 million to launch the Vinyl Vault, the cost for the due diligence might be trifle. 
DISCLAIMER: "IT Law issues in Japan" only provides general information about Japanese information technology law and does not, under any circumstances, constitute legal advice. You should first obtain the advice of professional legal counsel who is qualified in Japan before acting or refraining from acting based on this blog.