On the Judgment by the Appellate Court on the "Miruku Case"
Judgment by the Osaka High Court on February 27, 1997; printed in the "Hanrei Jiho" No.1624, p.131 (Original instance: March 17, 1994 by the Osaka District Court; printed in the "Hanrei Jiho" No. 1516, p.116 and in the "Hanrei Times" No. 867, p.231)
Masayoshi Sumida
* Associate Professor, Faculty of Law, Kanto Gakuen University
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Contents
| [1] | Outline of the Facts | ||||||
| [2] | Reasons for Judgment | ||||||
| [3] |
Notes and Comments
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[1] Outline of the Facts
X (plaintiff and appellee) is the Japanese Society of Rights of Authors and Composers (JASRAC). X is the only agency devoted to the rights of authors and composers in Japan which has been approved by the Director-General of the Agency for Cultural Affairs as an organization for performing agency business. X is an incorporated association to which is transferred by copyright owners the copyrights or their sub-rights, that is, the rights of performance (Art. 22 of the Copyright Law), the recording rights (Art. 21; Art. 2, Par. 1, Items 13 and 15), and the showing rights (Art.26, Par. 2; Art. 2, Par. 1, Item 19) of musical works in Japan and abroad (Art. 10, Par. 1, Item 2); manages these copyrights held in trust; and grants permission to use these copyrights to the domestic users of musical works, which include radio and television broadcasters and users in the fields of records, motion pictures, publishing, show business, social clubs and cable broadcasting. In consideration of this service, X collects from the users of musical works throughout the country the fees prescribed by the Rules relating to the royalty Rates for the use of the Works approved by the Commissioner of the Agency for Cultural Affairs in accordance with Art. 3, Para. 1 of the Law on Intermediary Business concerning Copyright and distributes the fees collected to the domestic and foreign copyright owners concerned. X established the fees to be charged in comprehensive annual contracts on the use of songs for singing to tunes reproduced by a karaoke machine and started to collect these fees on April 1, 1987 throughout the country.
Y1 (defendant and appellant) (1) opened a bar called Miruku (hereinafter referred to as "the Bar") around September 19, 1983. From that date to May 16, 1986, an audio karaoke machine that Y1 leased from Company Y (defendant andappellant) was installed in the Bar, then (2) from May 17, 1986 to July 16, 1988, a laser disc karaoke machine that Y1 and her husband Y2 (defendant and appellant) leased from Company Y was installed. A large number of karaoke tapes or karaoke laser discs were stored at the Bar, comprising karaoke software on which were recorded works managed by X as entrusted by the copyright owners with the copyrights or sub-rights, such as rights of performance, and the audio karaoke machine or the laser disc karaoke machine (hereinafter referred to as "the Karaoke Machine") was operated without any permission from X. While having hostesses and other employees serve customers with food and drink, it was suggested to the customers that they sing songs and lists of songs and a microphone were handed to them. Customers were allowed to sing accompanied by performance of the reproduction of the karaoke software they selected (the laser disc karaoke machine [the Karaoke Machine] displays on its screen, together with the performance of the song, scenes of the motion picture in which the song was used and the words of the song) in front of other customers, and hostesses and other employees were often allowed to sing together with customers or alone to the accompaniment of such performances. In this way, efforts were made to make the Bar's atmosphere more appealing so as to attract more customers and increase income from the Bar.
Company Y (defendant and appellant) is a corporation engaged in the lease and sale of acoustic equipment, which leases or sells business-use karaoke machines to bars, nightclubs and the like. Company Y concluded a lease contract on a business-use laser disc karaoke machine under its ownership (the Karaoke Machine) with Y1 and Y2, the owners of the Bar (hereinafter referred to as "the Lease Contract"), installed the karaoke machine in the Bar and exercised control over the operation of the Karaoke Machine by Y1 and Y2, the users, even after the delivery of the machine, thereby maintaining an actual advantage through control of the Karaoke Machine. In addition, Company Y collected fees (lease fees) according to the frequency of use of the Karaoke Machine and thus earned profits from the operation of the machine itself.
X argued that: (1) the provisions of the Copyright Law (Art. 2, Par. 1, Item 16) indicate that the singing of songs falls under the act of performance, that in the present case, the singing of songs by customers, not to mention the singing of songs by employees, to tunes reproduced by the audio karaoke machine or the Karaoke Machine falls under the act of performing musical works for profit by allowing the public to listen directly to them (Art. 22) because Y1 and Y2, the owners or co-owners of the Bar, are the principal parties involved and that therefore the singing without permission from X constitutes an infringement of the rights of performance under X's control; (2) the laser discs for the Karaoke Machine contain recordings of works under X's control, and the reproduction of these laser discs accompanied by the continuous display of pictures falls under the presentation of motion picture works as do both the words of songs (in characters) presented on the screen together with continuous pictures suitable for the songs and music for accompaniment reproduced as a result of the reproduction of laser discs (Art. 26, Par. 2; Art. 2, Par. 1, Item 19) and that therefore the act of reproduction of laser discs by the Karaoke Machine at the Bar owned by Y1 and Y2 without X's permission constitutes an infringement of showing rights, one of the rights under X's control; and (3) Company Y, as a party that every day repeatedly and continuously conducts lease contract business for the provision of business-use karaoke machines, which constitute the cause of the infringement of the above-mentioned rights (rights of performance and cinematographic presentation), intentionally continued to lease the Karaoke Machine knowing and approving the results which would be brought about by the infringement of the copyrights, and even if this were not true, because Company Y was naturally able to expect the results of the act of infringement of the copyrights by Y1 and Y2 referred to in(1) and (2) above, it committed negligence by not observing the duty of care it should have taken to avoid such results and by carelessly concluding and continuing the Lease Contract with Y1 and Y2, with the result that it participated in their act of infringement of the copyrights mentioned in (1) and (2) above by Y1 and Y2 (Art. 719 of the Civil Code).
X therefore demanded compensation for damage from Y1, Y2 and Company Y (hereinafter collectively referred to as "Y, etc.") on the grounds referred to above. The issues in the first instance were the following three:
| Issue 1: | Whether Y1 and Y2, the owners of a bar equipped with a karaoke machine, are liable for compensation for damage on the grounds of an infringement of copyrights with regard to the singing of songs by customers to tunes reproduced by the karaoke machine. | Issue 2: | If the finding on Issue 1 is affirmative, whether Company Y, the leaser of the karaoke machine referred to above, is liable for compensation for damage on the grounds of an infringement of copyright. |
| Issue 3: | The amount of damages to be paid by Y1, Y2 and Company Y. |
The decision in the first instance (by the Osaka District Court on March 17, 1994) approved X's claims on all of these three issues.
An appeal was then lodged by Y, etc. against the decision in the first instance. The claims made by Y, etc. in the second instance were the same as those in the first instance, but they also advanced three new issues.
The first of the new issues raised by Y, etc. in the second instance relates to the argument of Y, etc. that prior to the enforcement of X's new regulations on the singing of songs to the accompaniment of karaoke machines (April 1, 1987), users had been expressly exempted from the payment of fees for using works. The present judgment by the appellate court concluded that this argument was "inappropriate." The second new issue relates to the argument of Y, etc. that for many years X had neglected to collect fees for works in relation to the singing of songs accompanied by karaoke machines and to widely publicize the obligation to pay such fees, and so the negligence on the part of Y, etc. should be offset by X's negligence. The present judgment also concluded that this argument "cannot be adopted." The third new issue relates to the argument of Y, etc. that liability for compensation for damage was fully discharged by the payment of damages which Y, etc. should jointly pay to X (comprising the principal and penalty for delayed payment totaling 1,729,081 yen) by the counsel of Y, etc. into X's bank account, on behalf of Y, etc. on November 27, 1995. The present judgment approved this argument.
Since the liability for compensation for damage was discharged and became extinguished by the payment of the damages by Y, etc., the formal adjudication of the present judgment by the appellate court states that "The original judgment is dismissed. X's claims are dismissed." This is because just as the decision in the first instance did, the decision in this case approved the liability for compensation for damage due to the infringement of copyrights by Y1 and Y2 and due to the assistance by Company Y to such infringement.
The present judgment uses the expression "quote" the original judgment with regard to "Issue 1" and "Issue 3" in the decision in the first instance, and the expression "change" the original judgment with regard to "Issue 2." According to this order of the issues dealt with in the decision, this article summarizes and comments on the reasons for the judgment regarding Issues 1 and 2, these being the issues considered to be of special importance.
[2] Reasons for Judgment
<Reasons for judgment regarding Issue 1>
Whether Y1 and Y2, the owners of the Bar, are liable for compensation for damage
(1) Y1's liability for compensation for damage (use of the audio karaoke machine)
"In considering whether Y1 is liable for compensation for damage regarding the act of using without permission the so-called audio karaoke machine, a machine without any display of pictures, from July 9, 1985 to May 16, 1986, from the viewpoint of the provisions of the Copyright Law, singing by customers can be regarded as being the same as singing by Y1. Therefore, Y1's allowing of hostesses and other employees and customers to sing songs, which are musical works under X's control, to the accompaniment of the karaoke machine without X's permission should be deemed to be an infringement of the rights of performance, one of the copyrights on such musical works, and it should be deemed that Y1, as the principal party of such performance, infringes X's rights of performance. Even if fees have already been paid to the copyright owners in connection with the production of karaoke tapes, these fees are for permitting the reproduction (recording) of the musical works concerned. Because of this, though anyone is free to reproduce karaoke tapes as a reproduction of the performance of lawfully recorded musical works (see Art. 14 of the Supplementary Regulations of the Copyright Law, and Art. 3 of the Supplementary Regulations of the Copyright Law Enforcement Regulations), it cannot be considered that singing of songs by customers, etc. to the accompaniment of a karaoke machine, which is a different form of using songs from the above-mentioned reproduction of karaoke tapes, can freely be carried out without permission from the copyright owners only on the grounds that the accompaniment by a karaoke machine plays merely a supplementary role in singing (see the judgment by the Third Petty Bench of the Supreme Court on March 15, 1988, Minshu (Collection of Civil Judgments), Vol. 42, No. 3, p. 199)."
(1) Y1 and Y2's liability for compensation for damage (use of the Karaoke Machine [laser disc karaoke machine])
"In considering whether Y1 and Y2 are liable for compensation for damage regarding the act of using without permission the laser disc karaoke machine (the Karaoke Machine), a machine with continuous reproduction of pictures, from May 17, 1986 to July 16, 1988, the fact that Y1 and Y2, without X's permission, allowed hostesses and other employees and customers to use, at the Bar, the laser disc machine (the Karaoke Machine) to reproduce the laser discs containing musical works under X's control and allowed them to sing songs, which are works under X's control, to the accompaniment of the machine should be deemed to be an infringement not only of the rights of performance, one of the copyrights on the works under X's control, but also on the rights of cinematographic presentation, another of such copyrights, and therefore it should be considered that Y1 and Y2, as the principal parties of such performance and cinematographic presentation, are liable for compensation for damage on account of the above-mentioned infringement of the rights of performance and cinematographic presentation."
<Reasons for judgment regarding Issue 2>
Whether Company Y is liable for compensation for damage
"Company Y concluded the Lease Contract (including its renewal) with Y1 and Y2, delivered the Karaoke Machine to Y1 and Y2, allowed Y1 and Y2 to operate the machine at the Bar in accordance with the management rules or obligations to observe the method of operation prescribed in the Lease Contract, maintained, inspected and repaired the Karaoke Machine from time to time, and continuously supplied Y1 and Y2 with karaoke software (laser discs) for use with the Karaoke Machine that contained new pieces of music and songs. Since most of the musical works contained in these laser discs are those under X's control (if a laser disc is put on the Karaoke Machine, the machine's TV display shows continuous pictures and the words of songs, which are the said works under X's control, and the melodies are reproduced), it should be evident that the use by Y1 and Y2 of the Karaoke Machine for singing of these songs by customers with the accompaniment of the machine constitutes an infringement not only of the rights of cinematographic presentation to the musical works under X's control but also on the rights of performance. (Even if fees have already been paid to X in connection with the production of laser discs, these fees are for permitting the recording on laser discs of the works under X's control. Because of this, it cannot be considered that the reproduction for profit and in public of works under X's control which are contained in laser discs can freely be carried out done without permission from the copyright owners only on the grounds that the said fees have already been paid.)
"Although Company Y does not operate the Karaoke Machine itself, the company, as an entity which repeatedly and continuously performs lease business that includes the provision of business-use karaoke machines to users, which is highly likely to infringe the rights of cinematographic presentation and performance to musical works under X's control, as of April 1, 1987, the date that X selected as the date for starting the calculation of damages to be claimed from Company Y, already knew, or if it did not know, was easily able to know, that the use without X's permission of the Karaoke Machine for singing of songs by customers to tunes reproduced by the machine would infringe the rights of cinematographic presentation and performance to the musical works under X's control. Therefore, it should be concluded that Company Y should have known about the said high possibility of infringement.
"As stated above, it should be considered that Company Y, knowing that Y1 and Y2 allowed customers to sing songs at the Bar using the Karaoke Machine without X's permission and accepting the results of the said infringement of copyrights, continued and renewed the Lease Contract to provide the Karaoke Machine and thereby participated in the said act of copyright infringement by Y1 and Y2.
"Even if Company Y did not carry out the foregoing act with a clear recognition as referred to above, it should be said that the company, as an entity engaged in the lease of the Karaoke Machine involving a very high possibility of copyright infringement mentioned above, has the duties of care (1) to inform Y1 and Y2, when it concludes (or renews) the Lease Contract with users of the Karaoke Machine, in anticipation of the situation where the users may use the Karaoke Machine for singing of songs by customers to the instrumental tracks recorded on laser discs without X's permission, of the fact that if the users use the machine in the said way, this will infringe the rights of cinematographic presentation and preformance to the musical works under X's control and so they should conclude a license contract for these works with X, and making the users understand this fact well; (2) even after the conclusion of such a contract, to check the existence of such a license contract from time to time and if no such contract is concluded, to urge the users to promptly conclude such a contract with X; and (3) if the users do not consent to the conclusion of a contract with X, to consider the cancellation of the Lease Contract and make efforts to withdraw the Karaoke Machine from the users. However, Company Y neglected all of these duties of care and continued and renewed the Lease Contract with Y1 and Y2, who committed the said act of copyright infringement, thus providing the Karaoke Machine without taking any proper action to prevent such copyright infringement. Because of this, it must be said that Company Y committed negligence in this respect and that the company, at least as the entity assisting Y1 and Y2 in the said act of copyright infringement, cannot be exempted from liability for joint unlawful act in accordance with Art. 719, Para. 2 of the Civil Code."
[3] Notes and Comments
(1) Introduction
The present judgment is the decision by the appellate court on the judgment on the "Miruku (Karaoke Machine Lease) Case" by the Osaka District Court on March 17, 1994 (Notes 1 and 2).
In its decision, the court of first instance found that the owner of the karaoke bar is liable for infringement of copyright (right of performance and cinematographic presentation) for singing of songs by the customers in the karaoke bar, and at same time the leaser of the karaoke machine to the owner is liable for a joint unlawful act by the providing the karaoke machine as a result of assisting and participating in the copyright infringement.
It can be said that the judicial precedents in Japan have virtually established the liability for copyright infringement of karaoke bar owners regarding the singing of songs by customers at karaoke bars, and before and after the judgment by the Supreme Court on the "Club Cat's Eye" Case on March 15, 1988 (Note 3), there are some precedents (described later) which take a similar position to that of the decision in the first instance and the present judgment. This part of the present judgment is also an addition to the past precedents.
The decision in the first-instance indicated first of all that for laser disc karaoke machines, the rights of cinematographic presentation of Art. 26, Para. 2 of the Copyright Law extend to music for accompaniment, and the display of the words of songs in the form of characters, reproduced by laser discs, and the present judgment also did so. This is a noteworthy point.
In addition, the first-instance decision in the present case is the first in Japan to approve a leaser's liability for contributory infringement of the copyright. The present judgment, which is the decision by the appellate court on the case, reached a similar conclusion and as described later, defined more clearly the conditions of assistance that would make the leaser liable for copyright infringement. This is highly noteworthy and valuable in terms of the effects on legal theory and practice. However, the method of theoretical construction used to draw the conclusion has some problems, as discussed later.
With the rapid progress of multimedia, the Internet and other techniques of reproduction and communications, the forms of use of copyrighted works are increasingly changing, with the result that the forms of copyright infringement are also undergoing great changes. The use of music with karaoke machines is now shifting from communications karaoke for business and home use to Internet karaoke. Services providing coverage of live concerts and personal live shows and the delivery of music and musical scores have also appeared on the Internet.
In this situation, whether the manufacturers and sellers of devices, copy protection removing units and other equipment that can be used for the unauthorized reproduction and use of musical works, etc. as well as bulletin board system (BBS) operators and providers who provide opportunities to publish unauthorized reproductions are liable as participants or assistants in copyright infringement has become a grave issue.
The act of participation or assistance in copyright infringement referred to above often realizes much larger profits than the act of direct copyright infringement itself. It is clear that opportunities to realize such profits will increase further with the development of reproduction and communication technologies. As stated later, the U.S. Copyright Law has a long history of forming by judicial precedents the theory of indirect copyright infringement for such acts of participation and assistance, and has recently included in this category the liability of BBS operators on PC networks for indirect infringement. In the National Information Infrastructure (NII) project, the need for regulations on broader, more general indirect copyright infringement is being discussed.
The Law concerning Copyright, Designs and Patents of 1988 in Britain expressly stipulates such indirect forms of copyright infringement, while Art. 69, Para. f of the German Copyright Law definitely provides that the manufacture and sale of so-called copy protection removal and evasion units, etc. constitute indirect copyright infringement. In Germany, the "Electronic Services Law" (Teledienstgesetz), part of the "Multimedia Law" (Informations- und Kommunikationsdienste-Gesetz [IuKDG]) (Note 4) which was approved on July 4, 1997 and came into effect on August 1 the same year, also expressly stipulates the cases where suppliers of information services (providers, etc.) are liable for the contents of services offered by others. The Law provides that the suppliers of information services are liable in cases where it is possible to recognize the contents of the services of others and it is technically feasible to prohibit the use of such a service, which means that they are not responsible if they act simply as an intermediary for the provision of others' services.
In addition, Art. 11 of the WIPO Copyright Treaty and Art. 18 of the WIPO Performance and Phonograms Treaty, which were adopted at the foreign affairs meeting of WIPO (the World Intellectual Property Organization) on December 20, 1996, contain "Obligations concerning Technological Measures," which establish international rules for the protection of copyrights on the Internet, such as the prohibition of so-called "removal of guards" against reproduction.
In Japan also, efforts to review the Copyright Law have been made in response to this international situation. In these circumstances, the decision in the first instance and the judgment by the appellate court in the present case, which, in the situation where the Copyright Law did not yet have express provisions on indirect infringement, attempted to settle the case in terms of copyright infringement and assistance in such infringement or joint unlawful act under the Civil Code, are expected to provide a major opportunity to develop indirect copyright infringement theory, which has seldom been discussed in Japan. Their impact on future legislative work cannot be ignored.
The following sections will examine "Issue 1: Whether the owners of the Bar are liable for compensation for damage themselves" in the decision in the first instance which is quoted by the present judgment, and "Issue 2: Whether Company Y is liable for compensation for damage" which is changed by the present judgment in this order.
(2) Reasons for judgment regarding Issue 1 (liability of the owners of the karaoke bar for compensation for damage)
The reasons for the judgment regarding Issue 1 conclude that the owner of the karaoke bar is liable for infringement of copyright (right of performance) for singing of songs by the customers in the karaoke bar using an audio karaoke machine and also is liable for infringement of copyright (right of cinematographic presentation and performance) for singing of songs by the customers using a laser disc machine.
1) Singing of songs by customers using audio karaoke machines
Neither judicial precedents nor theories take exception to the conclusion itself that reproducing musical works contained in karaoke tapes, etc. using a karaoke machine at a karaoke bar and allowing customers to sing songs to the tunes so reproduced constitute an infringement of rights of performance (Note 5). The theories also agree with this conclusion (Note 6). The reasons for the judgment are also in line with these precedents and theories.
However, there are two main methods of theoretical construction, which differ from each other.
The first opinion regards singing by customers to be the same as singing by the owners of the karaoke bar and considers that the owners are the principal parties to the unauthorized performance of the musical works. Since the judgment by the appellate court on the "Club Cat's Eye" Case on July 5, 1984 (Note 7), this opinion has consistently been adopted as judicial precedent (Note 8) and seems to have become virtually established since the Supreme Court decision in the "Club Cat's Eye" Case.
The Supreme Court decision in the "Club Cat's Eye" Case says that "From the viewpoint of the provisions of the Copyright Law, the singing of songs by customers can be regarded as being the same as the singing of songs by the defendant." In this respect, the present judgment uses almost the same reasons for judgment as those used by the Supreme Court and this fact also shows that the present judgment is in line with judicial precedents. Some theories support this opinion (Note 9).
The second opinion argues that it is "too fictitious and unsuitable" to regard singing by customers as being the same as singing by (the owners of) the karaoke bar and that the reproduction of karaoke tapes, etc. constitutes an infringement of rights of performance. The current Copyright Law provides that the reproduction of karaoke tapes, compact discs (CDs) and other lawful sound recordings does not infringe rights of performance except for "reproduction by categories of business which use musical works for the purpose of profit-making and are defined by Cabinet Order (Art. 14 of the Supplementary Provisions of the Copyright Law). The Cabinet Order defines these business categories as "tearooms and other businesses which serve customers food and drink and are equipped with special facilities for allowing customers to appreciate music" (Art. 3, Item 1 of the Supplementary Provisions of the Cabinet Order for the Enforcement of the Copyright Law). Therefore, the reproduction of lawful sound recordings at such businesses serving customers food and drink is deemed to be an infringement of rights of performance. Although karaoke machines installed at karaoke bars may not be regarded as "special facilities for allowing customers to appreciate music" as defined by the Cabinet Order, it is possible to regard these machines as similar to the "special facilities" and to consider that the reproduction of karaoke tapes using a karaoke machine constitutes an infringement of rights of performance. This opinion is not found in any judicial precedents but is included as a minority opinion in the above-mentioned Supreme Court decision in the "Club Cat's Eye" Case. Theories have mostly been established with respect to the second opinion (Note 10).
However, some jurists have pointed out that theoretically speaking, there is no reason to prevent the consideration that both singing by customers and the reproduction of karaoke tapes infringe rights of performance (Note 11). While singing by customers and the reproduction of karaoke tapes are different from each other, when determining who is the principal user of musical works it will be sufficient simply to consider who is the principal party to the installation and management of the karaoke machine. From the same viewpoint, it is also possible to establish the liability for joint unlawful act of a leaser of karaoke machines, who may be regarded as being the same as the principal party to the installation and management of these machines.
2) Laser disc karaoke machines
One judicial precedent concerning laser disc karaoke machines is the decision by the Fukuyama Branch of the Hiroshima District Court on the "Club Asuka" Case on August 27, 1986 (Note 12). The facts of the case are roughly the same as those of the present judgment. The reproduction of musical works contained in laser discs, etc. using a laser disc karaoke machine at a karaoke bar and allowing customers to sing to the melodies reproduced can be considered to be similar to the case of audio karaoke machines discussed in 1) above. Laser disc and audio karaoke machines differ in that the former reproduces songs recorded on laser discs and at the same time presents a movie containing the words of the song on its display, which poses the problem of rights of cinematographic presentation. The decision in the "Club Asuka" Case said that "The principal party to the presentation of the movies contained in laser discs (applying Art. 2, Para. 1, Item 19, and Para. 3; and Art. 26, Para. 2 of the Copyright Law) is the said 'Club Asuka'," and recognized an infringement of rights of cinematographic presentation by the owner of the karaoke bar just as in the case of audio karaoke machines. However, while the decision in the "Club Asuka" Case referred only to "presentation of movies" and did not clearly indicate the relationship with the works under the plaintiff's control, the present judgment is more specific by stating that "The reproduction of laser discs and allowing hostesses and other employees and customers to sing to the tunes reproduced constitute the presentation (presentation of the words of songs in the form of characters, and accompaniments) and performance (singing of songs) of the works under X's control, and it must be concluded that these acts constitute an infringement of the rights of cinematographic presentation and performance to the works under the plaintiff's control." If a work consists of both a melody and the words of a song, as in the case of popular songs, it is regarded as a combination of musical and literary works (Note 13) and showing occurs for each category of the work.
3) Legal nature of fees paid for the production of karaoke tapes and laser discs
As confirmed again in the reasons for judgment regarding Issue 2, the reasons for judgment regarding Issue 1 state in connection with the legal nature of the fees for the production of karaoke tapes and laser discs that such fees do not cover the fees for forms of use of musical works different from reproduction by the purchasers of these tapes or discs.
This is generally accepted as natural since copyrights are composed of reproduction rights, rights of performance and other sub-rights and their infringement is usually discussed for each of the sub-rights independently. However, there are no clear theoretical grounds for these independent discus-sions. In particular, there is a possibility that the doubt of so-called dual profits will be cast in a case where the obligation arises to pay fees for the performance of not only the musical works recorded (reproduced) on laser discs for karaoke machines and then sold, but also those transmitted to karaoke booths, etc. which are lawfully produced and lawfully shipped to the market ("product" according to the classifications of packaged software). This problem of dual profits is used as the basis of the theory of exhaustion of copyrights and other intellectual property rights. The exhaustion of copyrights is recognized only for distribution rights excluding lending rights, and in cases where the purchasers of reproductions performance works without permis-sion, they must obtain rights of performance, which do not exhaust. This is the same as the case where apurchaser of an patented products whose patent right is deemed to have exhausted is not allowed to produce any new products based on the invention. In the case of patent rights also, the right to manufacture does not exhaust.
(3) Reasons for judgment regarding Issue 2 (liability of the leaser of the karaoke machine for assistance in copyright infringement)
1) Theoretical construction of the reasons for judgment
With regard to the liability of the leaser of the Karaoke Machine for assistance in copyright infringement in the present case, the present judgment states that "It should be considered that Company Y, knowing that Y1 and Y2 allowed customers to sing songs at the Bar using the Karaoke Machine without X's permission and accepting the results of the said infringement of copyrights, continued and renewed the Lease Contract to provide the Karaoke Machine and thereby participated in the said act of copyright infringement by Y1 and Y2."
Therefore, the present judgment gives three factors supporting the liability for assistance: (1) the fact that the owners of the karaoke bar, the users, allowed customers to sing songs at the Bar using the Karaoke Machine without X's permission, that is, the existence of (direct) copyright infringement; (2) the fact that the leaser accepted the results of the copyright infringement by the users while knowing about such copyright infringement, that is, the existence of intention; and (3) the fact that the leaser continued and renewed the Lease Contract to provide the Karaoke Machine to the users.
That the present judgment gives these three factors is a result of the fact that since the present case is a case where compensation for damage is claimed, the issue is whether the act of participation and assistance in the direct infringement satisfies the requirements of Art. 719, Para. 2 of the Civil Code. Therefore, these factors are not those which establish an indirect infringement, an independent form of copyright infringement.
2) Factors supporting liability for assistance
Since this case concerns liability for a joint unlawful act by assistance, it is natural that the present judgment takes the position that the existence of a direct copyright infringement is necessary. The decision in the first-instance also took exactly the same position.
However, there is a great difference between the first-instance decision and the present judgment. The formerinferred the existence of negligence or nonperformance of the duty of care, which falls under factor (2) above, from the fact that the leaser earned profits by creating and continuing the risk of direct copyright infringement and by engaging in the control and management of the risk. In contrast, the present judgment regards the leaser's control and management as grounds for the objective factor that the copyright infringement was caused by the act of supply by the leaser.
There are some problems as to whether the existence of direct infringement is required for indirect copyright infringement. For example, in a case where liability for copyright infringement is extended up to the act of supply to users who carry out reproduction for private use (Art. 30 of the Copyright Law), which is considered not to constitute copyright infringement under the Copyright Law, the theory of joint unlawful acts by assistance, which necessarily requires the existence of direct infringement, will not be able to bring about any remedy. Although the singing of songs by customers at a "karaoke booth (karaoke room)" may not be regarded as singing "for the purpose of allowing the public to listen directly" (Note 14), if it is argued that the existence of direct infringement is not required, there will be a possibility for remedy provided that the fact of using the musical works exists.
As for other intellectual property rights, especially patent rights (Art. 101 of the Patent Law), the existence or occurrence of direct infringement is not a requirement for indirect infringement; it suffices if there is the probability of the existence or occurrence of direct practice. As in the case of German law, the theory of indirect infringement of patent rights was born and developed mainly to meet the need to prohibit the supply of patented inventions even to private practitioners.
With regard to the intention, factor (2), that is, the subjective factor, the present judgment recognizes negligence in the case in its latter part. The reasons for judgment sate: "Even if Company Y did not conduct the foregoing act with a clear recognition as referred to above, it should be said that the company, as an entity engaged in the lease of the Karaoke Machine involving the very high possibility of copyright infringement mentioned above, has the duties of care (2) even after the conclusion of such a contract, to check the existence of such a license contract from time to time and if no such contract is concluded, to urge the users to promptly conclude such a contract with X;and (3) if the users do not consent to the conclusion of a contract with X, to consider the cancellation of the Lease Contract and make efforts to withdraw the Karaoke Machine from the users. However, Company Y neglected all of these duties of care and continued and renewed the Lease Contract with Y1 and Y2, who committed the said act of copyright infringement, thus providing the Karaoke Machine without taking any proper action to prevent such copyright infringement. Because of this, it must be said that Company Y committed negligence in this respect." Thus, it can be said that the present judgment uses intention or negligence as a subjective factor supporting liability for assistance in copyright infringement in the present case.
The decision in the first instance placed great weight on this factor of intention or negligence related to liability for assistance in copyright infringement.
The first-instance decision states that "Considering the entire circumstances, including the fact that musical works contained in laser discs that are reproduced with a karaoke machine are mostly those under X's control and the actual operating situation of business-use karaoke machines for lease in which using the machine without X's permission means an infringement of the copyrights under X's control, the act should be regarded as one that creates the risk of infringement of the copyrights under X's control, and continues such risk or engages in the control and management of such risk, and at the same time it should be considered that, because Company Y earns profits as the consideration for such act, such act creates the duty to take preventive action against such risk and to inform and warn the users about the existence of such risk."
This clearly shows that the first-instance decision and the present judgment use different grounds for recognizing negligence and nonperformance of the duty of care as factors of liability of the leaser for assistance and participation in copyright infringement. That is, the decision in the first instance gives the following three factors as reasons for recognizing the leaser's negligence: (1) the fact that the nature of the Karaoke Machine is that "using the machine without X's permission means an infringement of the copyrights under X's control," (2) the fact that the leaser engages in the "control and management" of the installation and use of the karaoke machine, and (3) the fact that the leaser earns business profits by the act of supplying the machine.
On the other hand, the present judgment in the second instance cites only the nature of the business-use karaoke machine, which is factor (1) mentioned in the first instance. It uses factor (2) referred to above as grounds for the fact that copyright infringement by the users occurs as a result of the leaser's act of supplying, which is an objective factor, and does not mention factor (3), the leaser's profits.
In other words, the present judgment uses one of the facts which is used as the grounds for subjective factors (negligence, nonperformance of the duty of care) in the first instance as the grounds for an objective factor and does not mention another fact as a reason.
However, the concrete contents of negligence and nonperformance of the duty of care in the first-instance decision are almost the same as those in the present judgment. The first-instance decision states that the leaser of business-use karaoke machines, which have the character that "using the machine without X's permission means an infringement of the copyrights under X's control," has the duty of care of, at the time of concluding a lease contract, urging the owners of karaoke bars who are lessees to conclude a license contract on the use of copyrighted works with X, and even after the conclusion of such a contract, checking the existence of such a license contract and if no such contract has been concluded yet, directing and instructing the owners to start negotiations with X on the conclusion of a contract and if the owners do not consent to follow such directions and instructions, canceling the lease contract and withdrawing the lease assets (karaoke machines, etc.) from the owners.
These points indicate what effect these two decisions will have on business practices. They appear seem to have virtually established the duties of care which the leasers of karaoke machines should fulfill at the time of concluding a lease contract or during the term of the contract.
Here it should be noted that both the first-instance decision and the present judgment give the character of the karaoke machine, namely, the Karaoke Machine, as the grounds for intention or negligence and nonperformance of the duty of care. While the former states that the Karaoke Machine has the character that "using the machine without X's permission means an infringement of the copyrights under X's control," the latter refers to "(the provision of) business-use karaoke machines, which is highly likely to infringe the rights of cinematographic presentation and performance to the musical works under X's control." Although they use different expressions, the two decisions regard the products rented by leasers as having the possibility of infringing on others' copyrights and of being supplied for copyright infringement. However, there are significant doubts about both the first-instance decision and the present judgment using the character of the article supplied to the direct copyright infringers as mentioned above merely as the reason for causing nonperformance of the duty of care. Instead, the character of the article should probably be regarded as an objective factor of copyright infringement by assistance or indirect infringement (a constituent of indirect infringement).
In other intellectual property rights, especially patent rights, the main factor supporting indirect infringement is whether the constituent of indirect infringement is "articles to be used exculsively for the manufacture of a product" or "articles to be used exclusively for the working of an invention." An important issue in the indirect infringement of trademark rights is also whether the constituent of indirect infringement is a so-called "articles bearing a reproduction of the registered trademark."
The decision in the first instance also gives (2) the fact that the leaser engages in the "control and management" of the installation and use of the karaoke machine and (3) the fact that the leaser earns business profits by the act of supplying the machine as grounds for nonperformance of the duty of care.
However, fact (2) is the same in nature as the possibility of management of the act of direct copyright infringement or the infringing constituent, which has recently been given as a factor for establishing the liability of providers on the Internet, etc. For example, the "Multimedia Law" in Germany referred to above, which can be regarded as the latest regulations concerning the Internet, defines the factors supporting the liability of providers of services offered by others as (1) the possibility of recognizing the contents of such service, and (2) the technical possibility of prohibiting the use of the service, that is, the possibility of deleting the service. It stipulates that providers are liable if they can manage the service offered by others and do not bear responsibility if they serve only as the mediators of others' services. Moreover, in general it is inconceivable that these service providers do not aim to earn profits.
In light of these facts, it can even be considered that the leaser's "control and management" of or possibility of managing the Karaoke Machine, the article supplied for direct copyright infringement, which is a factor regarded merely as the reason for nonperformance of the duty of care in the first instance, actually constitutes grounds for the act of participation and assistance in copyright infringement rather than those for negligence and nonperformance of the duty of care. In this sense, the theoretical construction of the present judgment in the second instance, which adopts the idea referred to above, is more in line with the nature of the case. However, an issue requiring future study is whether the possibility of management should be treated as an independent factor for establishing copyright infringement by assistance or indirect infringement.
The present judgment also gives a third factor, stating that by the act of continuing and renewing the Lease Contract to provide the Karaoke Machine to the users, namely, the copyright infringers (owners of the karaoke bar), "It should be considered that" Company Y, the leaser, "participated in the act of copyright infringement," and that "It must be said that Company Y, at least as the entity assisting Y1 and Y2 in the said act of copyright infringement, cannot be exempted from liability for joint unlawful act in accordance with Art. 719, Para. 2 of the Civil Code." This argument is almost the same as that of the first-instance decision, and the fact that the present judgment adopts such an argument is appropriate considering that X asserts a joint unlawful act by the assistance of Company Y, the leaser.
It seems that a claim for injunction was made at the initial stage of the present case. However, it would be difficult to approve an injunction claim for liability for joint unlawful act by Company Y's assistance based on the judicial precedents in Japan, although theoretically it may be possible.
The right to claim an injunction as the right to claim the cessation of infringement, an exclusive right, should be granted against those who infringe copyrights and there is a doubt about denying a claim for injunction on account of the fact that liability for joint unlawful act by assistance is defined by Art. 719 of the Civil Code. As for the providers of the constituents of infringement or articles used for infringement to the infringers of other intellectual property rights, especially patent rights, the Tokyo District Court found in the decision in the "Accelerating Crusher" Case on July 24, 1968 (Note 15)that "To conclude that a part infringes on the present patent right, such a part should be used, from an objective viewpoint, exclusively for the manufacture of the defendant's products, which are the products on which the present patented invention is practiced, and should have no other uses." The Tokyo District-Court approved, in its decision in the "Partial Wigs" Case on February 22, 1991 (Note 16), liability for compensation for damage of the defendant who sold bonding members to the direct infringer and thus assisted the infringer on the grounds of nontrue joint responsibility with the direct infringer. As noted, it can be said that the judicial precedents on patent rights recognize indirect infringement as an independent form of infringement only in cases where a "articles used exclusively for" as provided in Art. 101 of the Patent Law is supplied and only liability for joint unlawful act by assistance in a case where the providers supply "things having other uses." Therefore, they seem not to approve a claim for injunction in the latter case, although there is a doubt about this.
From the standpoint of the judicial precedents as described above and in the present situation where the Copyright Law has no provisions on indirect infringement, it seems difficult to approve a claim for injunction and a claim for compensation for damage by regarding the liability of assistants in copyright infringement as an independent form of infringement. However, if only a claim for compensation for damage and not an injunction claim is recognized in connection with a joint unlawful act because such an act is the act of participating and assisting in infringement, there will remain some doubt as to whether such relief is a proper relief from infringement of copyrights, which are exclusive rights.
3) Impact of the reasons for judgment regarding Issue 3
Indirect infringement as a form of infringement of intellectual property rights is such that the infringer maybe accused of independently even in a case where no direct infringement occurs, not to mention in a case where direct infringement arises.
Unlike the Patent Law and other laws concerning industrial property rights and the Semiconductor Chips Law, the current Copyright Law in Japan has no provisions governing indirect copyright infringement and no legal theories have developed regarding such infringement. Because of this, in cases like the present one, the only possible way to accuse Company Y, the leaser, of responsibility is probably to rely on the theory of joint unlawful act by assistance.
More precisely, the Copyright Law does have Art. 119, Item 2, comprising provisions for punishing an act that constitutes assistance in copyright infringement or in an act falling under infringement (private reproduction, etc.) independently regardless of the existence of copyright infringement. The provisions stipulate that "A person who causes others to use the automatic reproduction equipment as provided in Article 30 (private reproduction) for the reproduction of a work or performance, etc. which constitutes an infringement of a copyright, publishing right or neighboring rights" shall "be liable to imprisonment with hard labor not exceeding three years or a fine not exceeding three million yen," which is the same as the punishment for copyright infringement (Note 17). Considering that the provision of automatic reproduction equipment like this for reproduction for private use is punishable for copyright infringement, it can be considered that the act of supplying reproduction equipment for reproduction for business purposes naturally constitutes an infringement independently.
Even the act of providing to those who carry out an act not infringing copyrights, such as reproduction for private use, should be prohibited if such an act unreasonably infringes on the interest of the copyright owner.
In a case where the karaoke machine, which is a lease asset, is not a business-use machine as in the present case but a machine for home use, etc., there is no direct infringement by the user and so it is impossible to give relief to the copyright owner by the theory of joint unlawful act by assistance. To establish indirect infringement as an independent form of copyright infringement, the nature or content of the means and the opportunity to supply to those who commit the unauthorized reproduction, etc. of copyrighted works are important issues. Sufficient examination should also be conducted as to whether such means and opportunity may be regarded as factors in causing copyright infringement and how subjective factors should be considered.
Internationally, laws and treaties have appeared which prohibit the manufacture and sale of devices for removing or evading the copy protection of computer programs, etc. It may thus be said that a situation now exists where the liability of operators and providers of electronic conferences on the Internet for assistance or indirect infringement is accepted (Note 18).
In such circumstances, the Tokyo District Court recognized, in its decision in the "Defamation" Case on May 26, 1997 (printed in the "Hanrei Jiho" No. 1610, p.22), not only liability for compensation for damage of a person who sent an article that defamed another person to an electronic conference on a PC network but also the liability of NIFTY-Serve, the operator of the PC network. The decision stated, as grounds for NIFTY-Serve's liability, that "If it is considered that the systems operator has come to know specifically the fact that remarks destroying another person's reputation were written in the forum it operates and manages, it should be concluded that the systems operator has, in light of its position and authority, a reasonable duty to take action necessary to prevent the reputation of such other person from being unreasonably destroyed." This concept agrees with that expressed in the factors for establishing the liability of service providers defined by the "Multimedia Law" in Germany, which gives as these factors the possibility of recognizing others' service and the technical possibility of prohibiting use by others. It is also a theoretical construction applicable to copyright infringement cases.
In Japan, studies have recently been commenced to include regulations on devices for removing copy protection in the Copyright Law, in order to make it conform with Art. 11 of the WIPO Copyright Treaty and Art. 18 of the WIPO Performance and Phonograms Treaty.
The present judgment only approves compensation for damage due to joint unlawful act by assistance in copyright infringement, and does not recognizes indirect copyright infringement as an independent form of infringement. However, it will have a great impact on these legislative efforts and legal business.
Footnotes
| Note 1. |
"Hanrei Jiho", No.1516, p.116 ff., "Hanrei Times", No.867, p.321 ff. The studies of the court dicision in this first instance, in addition to the author's paper, "Lease of Karaoke Machines and the Theory of Contributory Infringement of Copyright", in "Tokkyo Kenkyu", No.22 (1996/9), p.24 ff., Yasuhiro Yamaguchi, "Hanrei Hyoron", No.438, p.65 ff. and Yoshinori Gomi, "Chosakuken Kenkyu", No.23, p.222 ff. |
| Note 2. | A brief comment on this court dicision can be found in Yoshinori Gomi, "Case of Copyright Infringement by Karaoke Lease ('Miruku Case')", in "Copyright", No.435 (1997/6), p.38. |
| Note 3. | "Minshu (Collection of Civil Judgments)", Vol.42, No.3, p.199. |
| Note 4. |
The author obtained the original text of this law from http://www.iid.de/Rahmen/iukdg.htm#a1. See, "Germany Approves Electronic Signatures/The Multimedia Law Enacted" in the "Nihon Keizai Shimbun", July 5, 1997. |
| Note 5. | Decision by the Osaka District Court on April 12, 1994 in the "Judgment on the 'Miruku Case'", "Hanrei Jiho", No.1496, p.38. |
| Note 6. | Koji Abe in "Jurist", No.821, p.70; Masao Handa in "Jurist Extra Issue",No.91, "Collection of 100 Precedents on Copyright", p.28; Hiroshi Saito in "Hogaku Kyoshitsu", No.51, p.88; Kazuko Matsuo in "Jurist", No.927, p.99. |
| Note 7. | "Hanrei Jiho", No.1122, p.53. |
| Note 8. | Judgment on the "Club Asuka Case", by the Fukuyama Branch of the Hiroshima District Court on August 27, 1986 in "Hanrei Times", No.612, p.34; Judgment on the "Club Cat's Eye Case", by the Supreme Court on March 15, 1988 in "Minshu", Vol.42, No.3, p.199; Judgment on the "Club Maharaja Case", by the Takamatsu District Court on January 29, 1991 in "Hanrei Times", No.753, p.217; Judgment by the Osaka District Court on April 12,1994 (criminal judgment in this case: "Hanrei Jiho", No.1496, p.38); and Judgment by the Tokyo District Court on July 22, 1994 in "Hanketsu Sokuho", No.231, 6587. |
| Note 9. | Koji Abe in "Jurist", No.821, p.70 ff. |
| Note 10. | Masao Handa in "Collection of 100 Precedents on Copyright (1st edition)", p.29 ff; Kazuko Matsuo in "Jurist", No.927, p.100 ff. |
| Note 11. | Yuriko Inoue "Singing of Songs by Karaoke Machine: The 'Club Cat's Eye Case'", in "Collection of 100 Precedents on Copyright (2nd edition)", p.16. |
| Note 12. | "Hanrei Times", No.612, p.34. |
| Note 13. | Hiroshi Saito, "Outline of the Copyright Law (3rd edition)", p.60. |
| Note 14. | Yutaka Tanaka, in "Karaoke Rooms and the Copyright Law", in "Copyright", No.431 (1997/2), p.25, argues that this meets the requirements of "in public". |
| Note 15. | "Hanrei Times", No.229, p.231. |
| Note 16. | "Kogyo Shoyuken Kankei Hanketsu Sokuho", (Reporter of Industrial Property Rights-Related Judgments), No.190, p.9. |
| Note 17. | For further discussion on this problem, see the author's, "Theory of Contributory Infringement of Copyright: An Introduction", in "Tokkyo Kenkyu", No.16, p.18 ff. |
| Note 18. | For further details, see the author's, "Theory of Contributory Infringement of Copyright: An Introduction", in "Tokkyo Kenkyu", No.22 (1996/9), p.32 ff. |
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Copyright Update Japan 1998
Published by COPYRIGHT RESEARCH AND INFORMATION CENTER (CRIC).