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.

Can Japanese drugstores sell drugs online?

In Japan, the sale of drugs through the Internet by the drugstores was lawful for a long time. However, in 2009, the amended Enforcement Regulations of the Pharmaceutical Affairs Law banned most of the drug transactions conducted online.

The amendment was in accordance with the amendment of the Pharmaceutical Affairs Law which categorized the drugs into three categories, 1st, 2nd and 3rd, based on the possibility of their side effects. The 1st category drug is the most dangerous one, which needs the highest level of care. The 2nd category drug is less dangerous but care still needs to be taken. The 3rd category drug has the least amount of expected side effects (is it safe to say this?). Although the law itself did not stipulate anything on the sale of drugs through the Internet, the amended Enforcement Regulations advised that only 3rd category drugs may be sold through the Internet.

At that time, the drugs categorized in the 1st and 2nd categories made up 67% of all the sales of drugs. The Enforcement Regulations mean that virtually more than two thirds of all the drug transactions is prohibited. Two companies selling drugs filed a lawsuit. Kenko.com and Wellnet v. Japanese Government.

On January 11th, 2013, the Supreme Court rendered a judgment, affirming the high court's judgment, that the amended Enforcement Regulations of the Pharmaceutical Affairs Law is null and void. The court found that the law did not give the Minister of Health, Labour and Welfare the authority to amend the Enforcement Regulations to totally ban the online sales of 2nd and 3rd category drugs thus, because the Minister exceeded its authority, the Enforcement Regulations became invalid.

One good thing to note is that in Japan, it is really rare that the court agrees with the plaintiff and renders laws and regulations void. Although the Japanese Supreme court has the Marbury v. Madison like authority to nullify the laws and regulations against the Constitution, such authority is rarely exercised. It is said that there are less than ten occasions that the court nullified a law in its entire history since 1947 (when the Supreme Court of Japan was established). Even including the cases where regulations and ordinances are found invalid, it is safe to say that the January 11 Judgment is a very rare case.
As a result of the court's opinion, all the sales of drugs online by drugstores is now lawful. However, the government is trying to make new laws and regulations to restrict the sale of drugs through the Internet. Although I can understand the necessity to regulate them to some extent in order to prevent tragedy because of the adverse effect of some drugs, the regulation might make the plaintiffs fight against the government to win the freedom of the Internet, depending on the contents of the regulations. It is not clear how long the online drugstores can enjoy "the freedom of the Internet."

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.