Tokyo District Court decision
IP High Court decision
On February 14 2012 the IP High Court upheld a Tokyo District Court decision rejecting a claim for an injunction and damages against the owner of a shopping website under the Trademark Law (127/1959, as amended) and the Unfair Competition Prevention Law (47/1993, as amended). However, the court ruled that a trademark owner may, under certain conditions, be granted an injunction and damages against not only 'virtual mall' shop managers, but also the managers and operators of the webpages.
Article 2(3) of the Trademark Law provides that:
"'Use' with respect to a mark under this Law means any of the following acts:
(1) acts of applying the mark on the goods or their packaging;
(2) acts of assigning, delivering, displaying for the purpose of assignment or delivery, importing, exporting or providing through electrical telecommunication lines, the goods on which or on the packaging of which a mark has been applied;
(3) acts of applying a mark to articles for use by persons to whom the services are provided (including articles assigned or leased - hereinafter the same) when providing services;
(4) acts of providing services for the use of articles to which a mark has been applied for use by persons to whom the services are provided when providing services;
(5) acts of displaying, for the purpose of providing services, articles to which a mark has been applied and supplied for use in the provision of services (including articles for use by persons to whom the services are provided when providing services - hereinafter the same);
(6) acts of applying a mark to articles related to the provision of such services belonging to persons to whom the services are provided when providing services;
(7) acts of providing services through an image viewer by electromagnetic means (that is, an electronic or magnetic method or other method which is not perceptible by human beings - the same in the next paragraph), on which a mark is indicated, when providing services through image viewers;
(8) acts of displaying or distributing advertisements, price lists or business papers relating to the goods or services or offering them with the information pertaining thereto on which the mark is indicated by electromagnetic means."
Article 25 of the law provides that:
"The owner of a trademark right shall have an exclusive right to use the registered trademark with respect to the designated goods or designated services. However, where the trademark right is subject to a right of exclusive use, this provision shall not apply to the extent that the owner of that right has an exclusive right to use the registered trademark."
Article 36(1) of the law provides that:
"The owner of a trademark right or of a right of exclusive use may require a person who is infringing or is likely to infringe the trademark right or right of exclusive use to discontinue or refrain from such infringement."
Article 37 of the law provides that:
"The following acts shall be deemed to be an infringement of a trademark right or of a right of exclusive use:
(1) use of a trademark similar to the registered trademark in respect of the designated goods or designated services, or use of the registered trademark or of a trademark similar thereto in respect of goods or services similar to the designated goods or designated services;
(2) acts of holding, for the purpose of assignment, delivery or exporting, designated goods, or goods which are similar to the designated goods or designated services the packaging of which has a registered trademark or a trademark similar thereto applied;
(3) acts of holding or importing articles which are for use by persons to whom the services are provided and to which the registered trademark or a trademark similar thereto has been applied, in the provision of the designated services, or of services similar to the designated services or designated goods, for the purpose of using such articles in the provision of such services;
(4) acts of assigning or delivering articles which are for use by persons to whom the services are provided and to which the registered trademark or a trademark similar thereto has been applied, in the provision of the designated services, or services similar to the designated services or designated goods, for the purpose of causing such articles to be used in the provision of such services, or acts of holding or importing such articles for the purpose of assigning or delivering them;
(5) acts of holding articles bearing a reproduction of the registered trademark or a trademark similar thereto for the purpose of using such trademark in respect of the designated goods or designated services or of goods or services similar thereto;
(6) acts of assigning or delivering, or of holding, for the purpose of assignment or delivery, articles bearing a reproduction of the registered trademark or a trademark similar thereto, for the purpose of causing such trademark to be used in respect of the designated goods or designated services or of goods or services similar thereto;
(7) acts of manufacturing or importing articles bearing a reproduction of the registered trademark or a trademark similar thereto for the purpose of using such trademark, or causing it to be used, in respect of the designated goods or designated services or of goods or services similar thereto;
(8) acts of manufacturing, assigning, delivering or importing, in the course of trade, articles to be used exclusively for manufacturing goods bearing a reproduction of the registered trademark or a similar trademark."
Article 2 of the Unfair Competition Prevention Law provides that the following acts constitute unfair competition:
"(1) acts of using indications of goods, etc (meaning any indication of a person's name, trade name, trademark, mark, container or package of goods in connection with the person's business or other indications of goods or business, hereinafter the same) which are identical to or similar to those well-known among consumers as indications of goods, etc of another person, or acts of assigning, delivering, displaying for the purpose of assignment or delivery, or exporting, importing, or providing through electrical telecommunication lines, the goods using the indication of goods, etc of another person, and thereby causing confusion with the goods or business of such other person.
(2) acts of using the indications of goods, etc identical or similar to another person's famous indications of goods, etc as one's own indications of goods, etc or acts of assigning, delivering, displaying for the purpose of assignment or delivery, or importing, exporting, or providing through electrical telecommunication lines, the goods on which the famous indications of goods, etc have been applied."
Article 3(1) of the law provides that:
"A person whose business interests are injured or are likely to be injured through unfair competition may request a person who is injuring or likely to injure such business interests to discontinue or refrain from such injury."
Article 4 of the law provides that:
"A person who has intentionally or negligently injured the business interests of another person through unfair competition shall be liable to compensate for the damage caused by such injury. However, this shall not apply with respect to the damage arising from the use of trade secrets after the right provided for in Article 15 has been extinguished under the provisions of the same article."
Article 709 of the Civil Code provides that:
"A person who has intentionally or negligently infringed any right of others, or legally protected interest of others, shall be liable to compensate for any damages resulting as a consequence."
Perfecta Van Mille SpA owns the registered CHUPA CHUPS trademarks, consisting of stylised letters and a device, in Classes 9, 18 and 25.
Perfecta Van Mille filed suit with the Tokyo District Court against Rakuten K K, which operates a virtual mall under the name "Rakuten Market". Individual managers present their webpages as a virtual shop, through which they display and sell their products. On several such webpages, products were displayed for sale which bore marks similar to the registered trademark.(1)
The plaintiff sought an injunction and damages against Rakuten under the provisions of Article 36(1) of the Trademark Law, Article 709 of the Civil Code and Articles 3(1) and 4 of the Unfair Competition Prevention Law, claiming that the products in question had been manufactured without its authorisation and that their display and sale constituted trademark infringement and unfair competition.
On August 31 2010 the Tokyo District Court dismissed the plaintiff's claims on the grounds that the defendant was not involved as a person that assigned the products (or displayed them for the purpose of assignment) under the provisions of Article 2(3)(2) of the Trademark Law or Articles 2(1)(1) and 2(1)(2) of the Unfair Competition Protection Law.
The court reasoned as follows:
- On the Rakuten Market website, sales agreements are concluded by a customer placing an order, through the defendant's system, for products registered by shop managers on the defendant's webpages. The managers (ie, the vendors) accept the customer's order and transfer ownership of the product.
- The defendant was not a party to such sales agreements and was not recognised as assuming the obligation to transfer or deliver products to the customers.
- Therefore, the shop manager was the relevant party to the assignment for sale, whereas the defendant was not a party with regard to the sale of products registered on the webpages.
- Therefore, in connection with the products in question, the shop managers, not the defendant, were the relevant parties to the assignments for sale.
The court identified the following factors:
- Under the system operated by the defendant, information about the products that shop managers list on the webpages is registered and stored. Each shop manager registers products by entering information using the defendant's system. Thus, shop managers can register products on their own webpages without the defendant's prior authorisation. The defendant did not examine the products in question before their registration.
- Purchases are determined by each shop manager without the defendant's involvement. Furthermore, each shop manager decides on the sale price and other conditions of sale; the defendant has no authority to determine these conditions.
- Each shop manager has sole discretion to determine whether to accept an offer from a customer; the defendant is not involved.
- Delivery, payment and other procedures following the conclusion of the sales agreement are conducted directly between the customer and the shop manager.
- The shop manager and the defendant do not share the proceeds of product sales.
- Although the defendant receives a fixed shop management fee and a charge for use of the system (which is calculated as a percentage of sales), these sums are not considered part of the sales price. As the charge for use represents only 2% to 4% of the sales amount, the defendant cannot be deemed to profit from the sale by the same measure as the shop manager.
- When a customer places an order, a confirmation message is emailed to the customer and the shop manager. However, this process is automated and is independant of the judgement or decision making of the defendant.
- The functioning of the system as a whole, including its points system and the advice and consultation provided to shop managers, is unrelated to each individual sales agreement.
In view of these factors, the product sales in question were clearly made by the shop manager, independently of the defendant. There was no control relationship between the defendant and the shop manager; nor was there a strong management relationship that was equivalent to such a control relationship.
Since the profit and loss from the product sales were entirely attributable to the shop managers, such sales were not considered to have been made under the defendant's supervision. The court found that the defendant was not involved in, and had not received a profit from, the product sales in question in an equivalent capacity to that of the shop manager.
Therefore, the court found that the defendant was neither a party nor a joint party to the sale or assignment of the products in question.
The court added that the terms 'assignment' or 'display for the purpose of assignment' under Articles 2(1)(1) and 2(1)(2) of the Unfair Competition Prevention Law should bear the same interpretation as under Article 2(3)(2) of the Trademark Law.
The plaintiff appealed to the IP High Court, which upheld the Tokyo District Court decision. It dismissed the appeal, but with different reasoning from that of the district court:
- Where various shop managers have webpages on a defendant's website and display their products on these pages, and where customers can purchase products from such shop managers through prescribed steps, a trademark owner can obtain an injunction for the deletion of webpages and seek damages directly from the shop managers if the products displayed infringe its trademark.
- A trademark owner may also claim an injunction and damages for infringement against the operator of such webpages, as it would against the shop managers, if the operator becomes aware that shop managers are infringing its trademark (or there are reasonable grounds to believe that the operator is aware of such trademark infringement), and the infringing webpages are not deleted within a reasonable time. A trademark owner may take such action if the operator of the webpages manages and provides the virtual mall system and controls the operation thereof, including by:
- accepting offers from the shop manager;
- suspending services to the shop manager;
- discontinuing the management of the shop; or
- receiving, in exchange for simple arrangements for the establishment of webpages by shop managers, the benefit of shop management fees and system user charges.
In reaching this conclusion, the court considered the following factors:
- Since most of the products listed on the webpages do not infringe a third party's trademark rights, there appears to be little risk of trademark infringement being committed.
- The likelihood of the operator of the webpages immediately becoming aware of trademark infringement is relatively low, even if some of the products displayed on the webpages by shop managers may infringe trademark rights, as some shop managers retain a prior use right or are licensed by a trademark owner; moreover, some products may be parallel imports.
- However, trademark infringement is subject to criminal penalties under the Trademark Law. The webpage operator may be liable to such a penalty as an accessory to trademark infringement if it should have identified specific infringement by shop managers against the trademark rights of a third party.
- Having executed a shop management agreement with each shop manager, the operator derives a profit (in the form of a shop management fee and system user charge) from the operation of the webpages.
- Under the shop management agreement, the operator may take certain steps, such as the deletion of content or discontinuance of the management of a shop, in order to prevent trademark infringement if and when it becomes aware of such an act.
On this basis, it was held that an operator should take steps immediately to investigate the existence of infringement by asking each shop manager to report to it when a trademark owner raises an infringement issue. Moreover, the court considered that if the operator continues to take such steps, it will not be subject to an injunction or liable for damages on the grounds of trademark infringement; however, it will be liable and subject to an injunction and damages (together with the shop manager), if it neglects to do so.
Article 37 of the Trademark Law prescribes the acts that are deemed to constitute infringement. The law provides that a trademark right is "the exclusive right to use the registered trademark with respect to the designated goods or designated services" (under Article 25), and that the trademark owner "may require a person who is infringing or is likely to infringe the trademark right… to discontinue or refrain from such infringement" (under Article 36(1)). This raises the possibility of determining who is an infringing party not only on the basis of 'use' for the purposes of Article 2(3), but also from a social and economic point of view; as such, the scope of trademark infringement cases is not necessarily limited by the provisions on indirect infringement in Article 37.
The court examined how long the defendant had taken to delete the webpages in question. As it was accepted that the defendant had rectified the problems within eight days of being made aware of the infringement, the court concluded that it did so within a reasonable period.
In view of the above, the court concluded that the defendant's operation of Rakuten Market did not constitute infringement of the plaintiff's trademark in the circumstances; nor did it constitute unfair competition. Therefore, the plaintiff's claims were groundless and the district court decision was correct.
The IP High Court decision sends a warning to online mall operators to exercise greater care in the management and control of their operations. However, it leaves various practical and legal issues unresolved. For example, in what circumstances should the operator assume the obligation to delete illegal webpages (or delete counterfeit products from such webpages)? How soon should the operator take steps to delete infringing pages or products? The court's decision establishes that action must be taken within a "reasonable period of time". Is it safe to assume that a period of eight days will always be considered reasonable, as it was in this case?
The decision can be seen as an application to trademark infringement of the 'karaoke theory' now prevalent in copyright infringement cases in Japan. Under the karaoke theory, a party that is not the direct user of copyright should be treated as the actual user and be liable for infringement if it:
- manages and controls the use of the copyright work; and
- receives the benefit of the business profit derived from the use of the copyright work.
This theory was first applied to cases in which managers of karaoke bars who manage and control their customers' use of the facilities for singing songs under copyright should be liable as actual infringers, rather than their customers. However, there is good reason to consider that this new application of the karaoke theory needs more critical and careful analysis in future cases.
For further information on this topic please contact Eiichi Fukushima at Nishimura & Asahi by telephone (+81 3 5562 8500), fax (+81 3 5561 9711) or email ([email protected]).
(1) For example, products resembling the following: