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.

Japanese Whistleblower Protection Act - Will Japanese Manning be Protected?

Professor Yochai Benkler recently wrote a persuasive article on the Bradley Manning case. I believe that the result of this case may have an impact of chilling off potential whistle-blowers. Then, what about Japanese whistle-blower protection?

Japan has the Whistle-blower Protection Act ("WPA" )which essentially categorizes three types of whistle-blowing.
One type is internal whistle-blowing like the boss or the ethics hotline. In such a case, whistle-blowers are strongly protected. Only as long as the whistle-blower considers the illegal facts occurred or were about to occur, whistle-blowing is protected. Article 3(i).
Another type is whistle-blowing to administrative authority. In this type, intermediate protection is given. When there are reasonable grounds to believe that illegal facts occurred or were about to occur, whistle-blowing is protected. Article 3(ii).
The other type is whistle-blowing to mass media or other organizations neither internal nor administrative authority. In this case, at least, there should be reasonable grounds to believe that illegal facts occurred or were about to occur, but that is not enough. Additionally required are reasonable grounds to believe either (1) other types of whistle-blowing would cause lay offs or other disadvantageous treatment, (2) internal whistle-blowing would cause concealing the evidence, or (3) the boss asked the whistle-blower not to resort to whistle-blowing. Article 3(iii).

The "protection" means the prohibition of firing or any other disfavorable treatment because of the whistle-blowing. Article 3 to 5.

One good thing is that the WPA covers the protection of government officials. Article 7. Also, the Q&A by the government on the WPA stipulates that as the protected whistle-blowing is on illegal acts, it is considered not worthy of protecting as secret, therefore whistle-blowing would not violate the obligation of confidentiality. This means that if the requirements of the WPA are met, Japanese Manning may receive protection.

But there are some uncertainties. One of them is how the court would interpret the statute. In one well known classic case, the Japanese Supreme Court upheld the conviction of a journalist of a newspaper for soliciting to disclose classified information. People v. Nishiyama, 32-3 Minshu 457 (May 31, 1975). Although the way he seduced a female government official is questionable from the journalists' ethics (he approached the official and formed a sexual relationship for obtaining classified information), this case would suggest that depending on the circumstances, the court may interpret the language of the WPA very strictly.

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.

The Battle between Enterprise SNS and Groupware

In Japan, many companies currently use collaborative software, or groupware. The giant is Cybozu which has more than 30% of the share in middle-sized and small-sized companies, which is more than double of the second ranked Lotus Notes/Dominio (12.9%). My law firm also introduced Cybozu and it facilitates our scheduling and communication, through functions to see the schedules of other lawyers, the bulletin board, and messaging. Now, this is a kind of "must" for many companies because of its convenience.

However, the future of collaborative software might be threatened. The new trend is using a social networking service for facilitating communication within the enterprise. Some companies use Facebook's group function to substitute collaborative software. Other companies use Airy, Beat Shuffle, Chatwork, Chatter, and Yammer. (Note that recently Cybozu also released enterprise SNSs.) One of the characteristics of the service by the enterprise SNSs is that usually users can easily set up a community to share knowledge. This means that the cross-sectional communication becomes easier if we use enterprise SNSs. A small company might be happy with the current groupware. But for middle- and large-sized companies with many sections and sectors, this flexibility of enterprise SNSs seems to be attractive. As the interest of Japanese companies on enterprise social networking service increases, there is a concern on whether the enterprise SNS service will substitute collaborative software. Will groupware be replaced by enterprise SNSs?


On February 14, 2013, Yoshhisa Aono the President & CEO of Cybozu clearly said NO to this question. His point is that instead of enterprise SNS taking place of groupware, what will happen is that collaborative software will have a new communication function similar to an enterprise SNS and many companies will continue to use this modified groupware.

He pointed out that there is the problem that in many companies data are being scattered around different software. In addition to backbone software, companies own many other kinds of software such as email software, data warehouse, and groupware. As the usage of a large amount of data (or Big Data) is becoming more and more important, it is essential that companies store their data in one place. President Aono contends that introducing new coming enterprise social networking software is against this trend. He argues that as groupware is already a basic infrastructure of communication within companies, the customers will continue to use the collaborative software. He even said, "enterprise social tools will be incorporated into groupware and will eventually be extinguished." ( Kigyo muke no sosharu turu ha gurupu uea ni torikomare te shometsu shite iku daro.)

It is still too early to assess whether or not President Aono's argument is correct. There will be many enterprise SNS companies which will try to survive in some innovative ways. However, at least it is clear that groupware companies recognize enterprise SNSs as an important competitor and that the companies are trying to incorporate convenient functions of enterprise SNSs into their collaborative software. As long as this competition is not too harsh, I believe it is good for the user companies because we can anticipate a great amount of future improvement in both collaborative software and enterprise SNS.  

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.

New Victory of Apple against Samsung in Japan

Apple and Samsung have been fighting over IP all over the world. On February 28, 2013, Tokyo District Court ruled for Apple on the Japanese litigation between the parties. Unfortunately, Japanese court opinions are not disclosed automatically and even if it is obtainable, it will take some time until I can review the whole court opinion. So, I actually have not read the court opinion yet. However, according to the news report, this court opinion seems to be epoch-making in terms of Japanese patent law.

In this case, Samsung alleges Apple's infringement on Samsung's patent on 3G telecommunication technology. The court found the prima facie case for Samsung saying that Apple's products including iPhones are using the technology within the scope of Samsung's patent. However, Apple pointed out that Samsung made a "FRAND" announcement, which is to show its willingness to license the Standard Essential Patent (SEP) fairly, reasonably and non-discriminatorily and although Apple asked for license, Samsung did not negotiate with Apple in good faith. Apple argued that Samsung's patent infringement claim is an abuse of its right considering the FRAND announcement and Samsung's bad faith attitude during the license negotiation. The Tokyo District Court bought this argument and judged in favour of Apple.

Traditionally, abuse of right has been used in the context of patent. But in most cases, the concept is used when the holder of a patent has filed an infringement suit and such patent is null and void. For example, Japanese patent law, like the American equivalent, requires "novelty." But sometimes, the Japanese Patent Office misses important prior arts and issues a patent. In such a case, the patent can become null and void through an internal process similar to the re-examination process in the US. In Texas Instruments v. Fujitsu, 54-4 Minshu 1368 (April 11, 2000), or Kilby case, the Supreme Court of Japan ruled that if it is clear that the patent should be nullified, then even before the patent is actually nullified, the patent holder's claim is an abuse of right. After the judgment, the Japanese Patent Law was amended and Article 104-3(1) similar (but not identical) to the Kilby opinion was introduced. However, the Samsung case is not in this kind of context. It is the first time in Japan that a court found an exercise of patent as abuse of right because of the FRAND announcement of the patent holder.

As this is merely a district court level judgment, Samsung can appeal to the Intellectual Property High Court. So, whether this judgment will become final is not yet clear. Also, as the court opinion was not disclosed to the public, I could not check the detailed and concrete reason why the court found Samsung's action to be an abuse of its right. However, as the "FRAND" announcement is widely seen, the impact of this judgment can be enormous. I plan to update on this issue after reviewing the court opinion.

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 Copyright Law on User's Modification

In the U.S., it seems that, in general, copyright owners have a prima facie case against users' modifications and the issue is about whether users can establish a fair use defense. For example, in the case of Lewis Galoob Toys, Inc. v. Nintendo of America, Inc., 964 F.2d 965 (9th Cir. 1992), the producer of Genie Video Game Enhancer, which allows players to alter the video game, the court held that consumer's temporarily altering the video game does not create derivative work and that the fair use doctrine is applicable for the usage of the Enhancer for personal enjoyment (Note, however, that the case is distinguished by Micro Star v. FormGen Inc., 154 F.3d 1107 (9th Cir. 1998).). A not identical, but similar case was litigated in Japan. The Konami v. Spec Computers, 55-1 Minshu 87 (February 13, 2001), or Tokimeki Memorial case. 

Konami, a major games company in Japan produced a game called "Tokimeki Memorial." It is a kind of dating simulation where the hero (which the player controls) communicates with female classmates in a high school and if the hero satisfies certain requirements such as a certain amount of artistic skills, sport skills, intelligence and other parameters, the hero will receive a declaration of love from the heroines at the time of graduation and have a happy ending of the game. Many people played the "original" version of the game, but some people felt that meeting the requirement for a happy ending is not easy. Also, under the original version, it takes some time and effort to attain a certain amount of parameters until the female student characters come up during the story (that means that at the beginning of the game, the hero can only meet with male classmates until the time the hero has enough parameters) and some people felt that it was not a good idea. Spec Computer, the defendant, sold special memory cards with which the parameters information are already recorded. By making use of the memory card, game players can easily meet the requirements and receive a declaration of love. Moreover, because of the high parameters, the players can meet with female characters at the beginning of the game, which was originally impossible. Konami sued Spec Computer for damages.


Konami could argue the creation of derivative work but they did not. Rather, Konami chose the route of moral rights infringement, which seems to be easy in Japan. Different from the U.S., in Japan the moral rights of the authors are widely protected. You may think it odd to think of the moral rights of game software authors, but I believe that Japan imported a European copyright law, which embodies the so called "personhood" theory of copyright.

(Right of preserving the integrity) 
Article 20. (1) The author shall have the right to preserve the integrity of his work and its title against any distortion, mutilation or other modification against his will.

Article 20 of the Japanese Copyright Law provides the rights of the author to preserve the integrity of the work. The Supreme Court found that the memory card changed the parameters of the hero and as a result the story of the game was narrated beyond the originally planned scope and thus "modifi[ed]" the story.

Spec Computers argued that it was not they but the users who were altering the story. However, the supreme court did not buy the argument. The court found something similar to the American concept of inducement theory held in MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005). Spec Computers sold the memory card knowing that users could actually use the memory card to modify the story. The court ruled that Spec Computers indued a third party (namely, the users) to infringe the copyright of Konami and were thus liable for their contribution.

As the facts are different between Nintendo and Konami, I cannot conclusively say that the same thing as Konami would happen in Japan if the Nintendo case were to be brought to Japan. But I think this is an example of an interesting contrast between Japanese and American copyright laws, especially on moral rights.

March 14, 2013: I encountered an interesting article on Grokster, which you may want to read.  
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.