In the process of setting sail to the sea, what issues do companies need to pay close attention to? What risks are guarded against?
Risks faced by companies when going overseas
Economic globalization and integration have now entered a stage of rapid development. While more and more companies are expanding their territory locally, they are also gradually turning their attention to the international market. Among the many companies going overseas, companies in the video field that rely on the Internet have performed the most eye-catchingly. With the continuous advancement of Internet technology, there are more and more channels and communication modes for people to obtain information and meet their cultural and entertainment needs in daily life, such as highly interactive live broadcasts, short videos that can record daily life anytime and anywhere, and targeted Interactive barrages of real-time complaints about movies, TV dramas, etc. are currently in full swing, and the audience is quickly expanding from the local market to the international market.
But at the same time, as more and more companies go overseas, the problems and potential risks that companies have in host countries have gradually become more prominent. Some are reflected in the company's lack of decision-making risks in overseas investment environment and project estimates, some are reflected in business risks such as business management and financial content, and some are reflected in the lack of understanding of the host country's laws and lack of understanding of business decisions that are closely related to itself. Lack of adequate due diligence may even lead to legal risks such as infringement of the company's own intellectual property rights and other rights and interests, which cannot be effectively protected.
A high-profile lawsuit
Recently, the Japanese Intellectual Property High Court issued a judgment that an American video website company infringed the patent rights of Japanese companies during its operations in Japan. The issue reflected in this case is the regional characteristics of intellectual property rights and related laws and regulations. The impact on the intellectual property rights protection and infringement risk prevention and control of "overseas" companies deserves the attention of all companies. This has also brought reminders and warnings to many Chinese companies going overseas: while companies are expanding into foreign markets, they must also be fully prepared in terms of intellectual property layout, protection, and due diligence.
Details of the case are as follows:
The "FC2 Video" website is operated by the American company FC2 Co., Ltd. This website targets Japanese users and provides them with paid or free Web services in multiple languages including Japanese, among which blogs and personal homepages are the most famous. The company is headquartered in Las Vegas, Nevada, USA. Although the "user terminal" in the FC2 Video system is located in Japan, the "server" responsible for processing information is located in the United States.
Japan's famous barrage video sharing website "Niconico Animation" (Japanese: ニコニコAnimation), its operating company is DWANGO, CO., LTD. The company is headquartered in Chuo-ku, Tokyo and is a Japanese company. A major feature of the Niconico animation website is that during the video playback process, users can comment on the video content in real time. Since the comments are displayed while moving like bullets fired, this kind of real-time comment is vividly called "Barrage" (Note 1) . Niconico animation department is the founder of the barrage video website. Duowanguo Co., Ltd. applied to register this technology patent in Japan on March 2, 2007, and obtained the "Comment Publishing System" (Barrage) Patent No. 6526304 on May 17, 2019, which is "a comment publishing system" , which includes a server and multiple terminal devices connected to the server via a network."
[Picture of the plaintiff’s patent involved in the case (Source: https://www.bilibili.com/read/cv25128477)]
The litigation dispute between Duowanguo Co., Ltd. and FC2 Co., Ltd. revolves around this "barrage" patent. Duowanguo Co., Ltd. believes that the barrage function used by the FC2 Video website falls within the technical scope of its invention patent No. 6526304. Sending files from the "server" in the United States to the "user terminal" in Japan is the "production" of the patented "system" ". Duowanguo Co., Ltd. then filed a lawsuit against FC2 and others in the Tokyo District Court on the grounds that it had infringed its patent for the invention of barrage function, demanding that it stop the infringement and pay compensation.
Two different court decisions
The Tokyo District Court held that the patent system involved in the case was deemed to be production within the meaning of the Patent Law (Note 2) , and all components of the system must be produced in Japan. However, FC2's comment sending server is not located in Japan, that is, part of the patented system is not located in Japan. Therefore, based on the principle of regionalism, the court rejected Duowanguo Co., Ltd.’s lawsuit.
Dowanguo Co., Ltd. was dissatisfied with the first-instance judgment and appealed to the Intellectual Property High Court. On May 26, 2023, the Intellectual Property High Court made a second-instance judgment after a grand discussion, holding that: the sending and receiving of comments in the patent involved are an integrated act, the sending and receiving of FC2 comments are conducted in Japan, and Japanese user terminals bear the responsibility The important functions and invention effects of this system are also produced in Japan, and the use of FC2 will affect the economic benefits of Dowanguo Co., Ltd. It was ultimately determined that FC2 Co., Ltd. had infringed the invention patent rights of Duowanguo Co., Ltd., and it was ordered that FC2 Co., Ltd. stop the barrage function and pay damages.
Considering the importance of this case, the Japanese Intellectual Property High Court used the third-party opinion collection system (Note 3) to extensively solicit opinions from the general public, scholars, experts, etc. during the judgment process . In this case, after soliciting public opinions, the Intellectual Property High Court gave a judgment standard: Even when the server is located outside Japan, the following factors should be considered comprehensively to determine whether there is production behavior in Japan:
A. The specific form of the implementation behavior: transmission and reception are performed as a whole. When the Japanese user terminal receives each file, the FC2 system is completed, so it can be understood that the sending and receiving of letters is completed in Japan;
B. Among the many elements of the invention, the functions and roles played by each element located in Japan: The user terminal located in Japan implements the functions of the judgment unit and the display position control unit. These functions ensure that the comments displayed on the video are mutually exclusive. Overlap, thereby realizing the main function of the invention;
C. Where does the effect of the invention come from: improving the entertainment during user communication in the form of comments. This effect is achieved in Japan;
D. The economic impact of the use of the invention on the patentee: The economic benefits that Dowanguo Co., Ltd. can obtain from using the invention in Japan will be affected by the use of FC2.
[Explanatory diagram of the structure and operation of the FC2 system (Source: Japan Intellectual Property High Court website)]
[Explanatory diagram of the structure and operation of the FC2 system (Source: Translation)]
The case serves as a wake-up call for my country’s overseas companies
Although the above cases only focus on the geographical scope of patent rights, they are also an important warning to Chinese enterprises, especially those that have already deployed overseas or are about to go overseas - that is, before going overseas, enterprises must Make relevant plans in advance to effectively deal with the legal risks caused by different intellectual property policies in other countries.
First of all, on the basis of due diligence on the relevant intellectual property laws and policies of the overseas countries, conduct a compliance review of the company's core intellectual property rights. The regional nature of intellectual property rights is not only reflected in the geographical restrictions of its ownership protection. The laws related to intellectual property rights in different countries are also closely related to the country's intellectual property policies. The consequences of legal differences include two aspects: 1) Increased risk of infringement: The geographical environment of intellectual property is different, and the prior rights are different, which may fall into the scope of others’ rights, thus facing the risk of infringement; 2) Increased difficulty in safeguarding rights: Intellectual property-related Different legal policies increase the cost of rights protection, and fixing intellectual property rights in overseas countries requires new investment. As companies in the video field rely on the development of cultural industries, the protection of their core intellectual property rights is particularly important, because core intellectual property rights are often related to the core business of the company. Therefore, companies that need to go overseas should make due diligence on the relevant intellectual property laws and policies of the countries where they go overseas, and conduct compliance reviews of the company's core intellectual property rights before going overseas.
Secondly, establish and improve the intellectual property risk prevention and control mechanism, and flexibly adjust the risk prevention and control system according to the latest local developments during operation. Taking the successful experience of other large-scale enterprises in the world as an example, in order to maintain and develop the technological advantages of enterprises, enterprises, especially enterprises in the video field that rely on cultural and technological factors to develop, should immediately construct and improve the existing and possible intellectual property legal risks. A preventive mechanism to prevent the loss of intellectual property resources to strengthen the core competitiveness of enterprises. Establishing and improving risk prevention and control awareness is not limited to including: 1) enhancing risk prevention awareness; 2) cultivating professional talent management and cooperating with professional intellectual property service agencies; 3) strengthening the internal management of intellectual property assets within the enterprise; 4) establishing an intellectual property early warning system . It is worth noting that the establishment and improvement of intellectual property risk prevention and control mechanisms is something that modern development enterprises should focus on investment in construction, and enterprises with overseas needs should pay more attention to this risk prevention and control system in accordance with the latest local legal and policy trends. Adjustment.
Finally, based on the local culture and legal characteristics of the overseas country and the company's actual operating conditions, the enterprise's intellectual property layout is carried out and the enterprise's intellectual property strategy is planned. As mentioned above, companies in the video field should promptly fix their core intellectual property rights in overseas countries, but this is only the beginning. The overseas development of cultural production enterprises is inseparable from the absorption and integration of local culture. In the process of developing the company's core business, it should also combine the local culture and legal characteristics of the overseas countries with the actual operating conditions of the company, take the enterprise's core intellectual property as the core, gradually establish the intellectual property layout in the overseas countries, and plan the enterprise's intellectual property strategy. This will provide experience templates and legal support for subsequent development in other countries.
For enterprises, going overseas is both an opportunity and a challenge. Only by constantly adapting to the sailing wind direction and adjusting the helm mast during navigation can we move forward smoothly and finally reach our destination successfully.
Note 1: A system that promotes communication between users by superimposing and displaying comments sent by users via user terminals on the video while sharing videos between users.
Note 2: Article 2, Paragraph 3 of the Japanese Patent Law: In the invention of a product (including a program, etc.) in Item 1, the production, use, transfer, etc. of the product (referring to transfer and leasing, if the product is a program, etc.) , including provision through telecommunications lines), import and export, or proposed transfer (including exhibition for the purpose of transfer, etc.);
Note 3: In disputes such as patent infringement litigation, if the parties deem it necessary, they may apply to the court to hear the opinions of other parties, collect opinions from the general public on the application of the invention patent law and other necessary matters, and require them to provide Written opinion. This system is a procedure introduced in the 2021 amendment to the Japanese Invention Patent Law.