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2001 (Ju) 952

2002.04.25
2001 (Ju) 952
Minshu Vol.56, No.4, at 808
Judgment upon the case concerning the right to assign a copy of a work which is a film used in a home video game machine to the general public and the re-assignment of the copy
Case to seek injunction against infringement copyright
Judgment of the First Petty Bench, dismissed
Osaka High Court, Judgment of March 29, 2001
The right to assign a copy of a work which is a film used in a home video game machine to the general public is exhausted once it is lawfully assigned, and the effect of the right does not extend to a reassignment the purpose of which is not to present the copy to the general public.
Article 2, paragraph 1, subparagraph 19 of the Copyright Law, Article 2, paragraph 3 of the Copyright Law, Article 10, paragraph 1, subparagraph 7 of the Copyright Law, Article 26 of the Copyright Law, Article 112 of the Copyright Law
The jokoku appeal shall be dismissed.
The cost of jokoku appeal shall be borne by the jokoku appellant.
On the grounds of application for certiorari by representatives of the jokoku appellants, NM, KS, CT, II, TK, HW, MO, TM, MK, and HS:

1. An outline of the facts lawfully established by the original instance court is as follows:

(1) The jokoku appellants are copyright holders of software for the home video game machine as included in lists 1 to 6 of the game software attached to the judgment of the first instance court (hereinafter, 'the Software'. Individual software is indicated with a number attached).

Software 1 is a role-playing game in which the story is of a principal character who escapes from a city contaminated by a virus produced by an arms manufacturer by combating the virus and other things unfold. Software 2 is a role-playing game in which the player manipulates a robot and saves an island from catastrophe. Software 3 is a role-playing game in which a detective pursues an enemy, combats monsters and uncovers the truth behind a fire.

Software 4 is a fighting game in which characters with various fighting skills fight against one another. Software 5 is a racing game in which the player becomes an amateur racer and enjoys a racing game. Software 6 is a game in which football is played, with the World Cup as a target.

Each piece of Software is expressed as a complete uninterrupted image by showing the image, which is derived from the programme contained in the CD-ROM, in the designated place on the screen of the display monitor in a sequence. In each piece of Software, the image of the animation moves realistically through the use of computer graphics, is designed to increase the reality through the use of sound effects and background music linked to the image, and is expressed in a creative manner using the methods of animation pictures. The voice and sounds which emerge from the animated image on the screen and the speaker vary in accordance with the manipulation of the controller by the player in the process of the game, and the specific content differs in each manipulation but are within the scope set by the programme in advance.

(2) The jokoku appellees purchased from the customers the Software which was lawfully sold by the jokoku appellants and which was purchased via retailers by the customers who used it and sold it as second-hand software.

(3) At the time that the Copyright Law was enacted in 1970, for theatre films, there was a business practice - a distribution system - in which film producing and distributing companies, presupposing that the film was to be shown to the public in the theatres, produced a certain number of duplicates from the original negative film, leased them to the film theatre owners, and after the period of showing the film, either had it returned or transferred to another designated film theatre, and thus the film is assigned from one theatre to another. Production companies retrieved the investment needed for the production of the film through the public showing of films through this distribution system, and the printed films were of high commercial value for generating substantial profits by showing the film to the public in theatres.

2. In the present case, the jokoku appellants sought an injunction against the distribution of second hand Software and demanded the destruction of such software.

3. Under the circumstances lawfully established by the judgment of the original instance court, the ruling of the original instance court that the Software is a 'work which is expressed in a manner with visual or visual and sound effects similar to films and which is fixed in a thing' as provided by Article 2, para.3 of the Copyright Law, and it therefore, is a 'work of film' as provided by Article 10, para.1, subpara.7 of the same Law is justifiable.

Since the Software is a work of film, the ruling of the original instance court that the copyright holder has an exclusive right of distribution as provided by Article 26, para.1 is also justifiable.

4. If a patent holder or a person who has been licensed to work the patent from the patent holder assigns the product which is patented in Japan, the patent is exhausted in relation to this product as having achieved its purpose, and the effect of the patent does not extend to the reassignment of this patented product. This is a precedent of the present court (Supreme Court, 1995 (o) No.1988, Judgment of the Third Petty Bench July 1, 1997, Minshu 51-6-2299), and this rule should be applicable in principle in cases where a copyrighted work or its duplicate is assigned. This is because (1) the protection of the rights of the copyright holder by the Copyright Law needs to be realised in harmony with public and social interests, (2) in general, in cases of the assignment of products, the assignor transfers the rights in relation to the products to the assignee and the assignee acquires the rights which belonged to the assignor. In cases where a copyrighted work or its duplicate is placed in the market for distribution, the transaction is effected with the presupposition that the assignee acquires the right to reassign the products freely. If each assignment of the product or its duplicate requires the consent of the copyright holder every time, this would inhibit the free distribution of the products in the market, the smooth distribution of the copyrighted work and its duplicate will be inhibited, and it is likely to harm the interests of the copyright holder, and ultimately may be against the goal of the Copyright Law which purports to 'aim at the protection of the rights of the authors and thus contribute to the development of culture' (Article 1, Copyright Law), (3) on the other hand, the copyright holder receives the payment for the assignment when he assigns the copyrighted work or its duplicate, or receives a royalty when licensing the use of the copyright, and therefore, is guaranteed the opportunity to secure compensation, and there is no need to allow a double benefit to the copyrightholder in relation to the copyrighted work or its duplicate which had been assigned by the copyrightholder or the licensee.

Article 26, para.1 of the Copyright Law on the right of distribution of works of film was introduced at the time of the present Copyright Law as the implementation of the Berne Convention on the Protection of Literary and Artistic Works (amended in Brussels on June 26, 1948) which had a provision on the distribution right of works of film. The reasons why distribution rights were acknowledged only to films were because for film production, substantial investment is made, and there was a need for controlling the distribution in order to ensure the effective retrieval of the investment, and because, at the time of the enactment of the Copyright Law, there was a system of distribution as mentioned above in relation to films, for theatres which presupposed the rental of films on several occasions, and furthermore, because it was difficult to control the showing of a film which was not intended by the copyright holder, it was necessary to control distribution including the assignment and rental of the duplicates which is the stage prior to distribution. Due to these reasons, as an interpretation of Article 26 of the Copyright Law, in relation to works of film and their duplicates which are subject to the practice of the above-mentioned distribution system, it was understood that the right to assign or rent these works for the purpose of showing them to the public (Article 26, Article 2, para.1, subpara.19, second half) is not exhausted. However, since Article 26 does not indicate whether the right to distribution of the copyrighted works of film is exhausted or not, therefore, whether the right is exhausted or not is solely a matter of interpretation.

Concerning the assignment of duplicates of copyrighted works of film for home video game machines the purpose of which is not that of showing them to the general public, from the above viewpoints (1), (2) and (3) including the securing of smooth distribution of products in the market, the right to assign the given copyrighted work to the public is exhausted once it has been lawfully assigned through achieving its goal, and the effect of the copyright does not extend to the reassignment of the copyrighted work to the public.

By virtue of Article 26-2, para.1 of the Copyright Law after the amendment by Law No.77 of 1999, the right of assignment has been acknowledged in relation to copyrighted works other than films, and by para.2 of the same provision, the right to assign was acknowledged to have been exhausted once the work has been lawfully assigned. However, concerning copyrighted works involving films, since the distribution right includes the right to assign the work, para.1 of the provision was understood not to be applicable to works involving films. Para.2 of the same provision merely confirms this rule on exhaustion. It is not appropriate to understand that exhaustion has been denied by the adverse interpretation of paras. 1 and 2 of the said provision in relation to copyrighted work involving films such as the Software in the present case.

5. Thus, in relation to the Software, due to the fact that the jokoku appellants lawfully sold the Software and customers purchased it via retailers, the right to assignment which is part of the right of distribution has been exhausted through achieving its goal, and the copyright does not extend to the reassignment of the second-hand Software to the public by the jokoku appellees. The ruling of the original instance court on this point is justifiable, and there is no unlawfulness as argued by the jokoku appellants. The argument cannot be accepted.

The jokoku appellants are seeking an injunction against distribution, but it is not proved that the jokoku appellees are renting the Software, so there is no ground for an injunction as far as rental is concerned.

Thus, the justices unanimously rule as the main text of judgment.
JusticeIJIMA Kazutomo
JusticeFUJII Masao
JusticeMACHIDA Akira
JusticeFUKAZAWA Takehisa
JusticeYOKOO Kazuko
(*Translated by Sir Ernest Satow Chair of Japanese Law, University College, University of London)