1 Demand for damages

When judging this "nature of an infringer," in a demand for damages the basis is a theory of torts that seeks fairness between the parties. For an injury in which the acting party is deemed to have the "nature of an infringer" and which is in a proper cause-and-effect relationship with the infringement, the decision should be made from the standpoint that it is proper, as a matter of fairness between the parties, to recognize the victim's demand for indemnification, and in this sense it is an extension of the "cause-and-effect relationship" that is required to constitute a tort. Therefore, it is proper to consider this in parallel with the "cause-and-effect relationship" that is required to constitute a tort, and specifically, it is appropriate to find that the acting party has the "nature of an infringer" only for an infringement that is found to arise from the act of the acting party in the generally accepted sense, as in the proper cause-and-effect relationship in the theory of torts.

(3) As to whether the above requirements are satisfied in each case of "indirect infringement" of a copyright, it becomes necessary to adopt quite a different viewpoint for each of the types of infringement listed in Part 2 above. This paper focuses on the requirements for "indirect infringement" for each type and provides guidelines for deciding these questions in specific cases. The following is a detailed discussion of each type of infringement.

2) Type 1 (provision of equipment or software that is used for copyright infringement)

(1) Type 1 has a structure that is basically as shown in Figure 1.

Figure 1

In what cases do A1 and A2 bear liability as "indirect infringers"?

First, the formal act of copyright infringement is being committed by the user, but due to the limiting provisions and so on, this does not constitute copyright infringement, and if no direct infringement has been committed, then neither A1 nor A2 bear liability as "direct infringers." This applies to types 2 and 3 as well.

The problem is the case in which direct infringement occurs. Since there is a danger of all kinds of equipment being used for copyright infringement, the case of type 1 differs from the case of type 2, and since the copyright infringement takes place outside one's own area of control, supervising the other party that provides the equipment or software is normally impossible. Thus, in type 1 cases, there is a great need to narrow the scope with respect to the "nature of an infringer" in a demand for damages. However, there are no legal provisions that address this point, so this point is a matter of interpretation.

The decision of the U.S. Supreme Court regarding this point, which is quoted as follows, is of value asa reference for the interpretation of Japanese law.

"If the product can be widely used for legal, unobjectionable purposes or is essentially used in applications which are not infringements, then the sale of duplication equipment, like the sale of other merchandise, does not constitute a contributory infringement"

In determining the "nature of an infringer" for the purposes of a copyright-related demand for damages, it is important to determine whether the equipment will be legally in widespread use which does not entail copyright infringement. This is because it is considered that if the equipment is legally in widespread use not entailing copyright infringement, then the act of the providing party in providing the equipment normally cannot be said to create copyright infringement as the concept is generally understood, and a claim based on the "nature of an infringer" must be denied.

This presents one distinguishing characteristic: whether the equipment or software is legally in widespread use not entailing copyright infringement.

(2) If the equipment or software is not "legally in widespread use not entailing copyright infringement," then is the "nature of an infringer" of the providing party affirmed, and does the providing party always bear liability as an "indirect infringer"?

The decision of the Osaka District Court in the karaoke equipment leasing case discusses this point briefly as follows (summary):

"With regard to the defendant company, upon concluding a new contract it should not only make the managers of its leasing partners thoroughly aware, by a method such as listing in the provisions of the contract, to take care to conclude a contract with the plaintiff licensing the use of the work, but also with regard to what is already under leasing contract at the time, the existence of signed licensing contracts with the plaintiff should be investigated and confirmed, and if a licensing contract has not yet been concluded, there is the cautionary obligation to instruct and guide said managers to agree to negotiations with the plaintiff on the conclusion of a contract, and if said managers do not follow such instructions and guidance, it must be said that there was a cautionary obligation to immediately cancel the leasing contract and remove the leased property (karaoke equipment, etc.)."

This court judgment indicates that a party who provides equipment that might be used for a copyright infringement has a cautionary obligation to instruct and guide the user, such as in a written contract, so as not to commit any copyright infringement. Here, the provider of the equipment is aware that the equipment, used as is, basically constitutes a copyright infringement, and in that the provider makes profit from its act of providing, it is considered to be proper in terms of profit balance as well.

In the above court judgment, however, a person in the leasing business has the further obligation to investigate whether users are committing copyright infringement and to cause them to avoid copyright infringement. Certainly, if it is a lease, the ownership of the equipment lies with the leasing company, and because the leasing company has the authority to check how the equipment is being used, it is considered not impossible to also impose an obligation to investigate copyright infringement. However, if ownership is fully transferred to the user, as in general cases, it is difficult to recognize a seller's right to investigate, and it would not be proper to impose on the provider the obligation to conduct an investigation looking for any copyright infringement by users. The above court judgment depends on the special nature of the act of providing in that it is a lease. Thus this cannot be construed to be a general requirement.

This presents another distinguishing characteristic: whether the provider has given the user instructions and guidance so as not to commit copyright infringement. This is one requirement for negligence in demanding damages. If the provider of the equipment gives instructions and guidance so as not to commit copyright infringement but nevertheless receives and ignores a warning, etc. that a copyright infringement is being committed in which the equipment is used, then the instructions and guidance are deemed to have been inadequate and negligence is recognized for the damage that arises due to subsequent acts of providing.

3) Type 2 (providing a place or opportunity for copyright infringement)

(1) A type 2 case basically differs from a type 1 case in that the act of copyright infringement is committed within the area of control of the party that provides the place or opportunity, as in Figure 2.

Figure 2

(2) In a case in which the provider of the place, etc. causes its own employees to perform an act that entails copyright infringement, it is naturally liable for damages under Articles 709 and 715 of the Civil Code. The problem is a case in which the copyright infringement is caused by a customer, etc. who basically has no relationship with oneself. It seems that in type 2, unlike the case in which equipment is provided, the parties to which the equipment is provided are specified and can normally be supervised, such as via a contract, so it can be said that there is less need to focus on the "nature of an infringer" than in the case of type 1.

On this point, in the American "dance hall" cases, the owner of the dance hall gains customers and profit by performances in its dance hall, and thus bears vicarious liability for copyright infringement committed in its dance hall, even if the owner did not know that it was a copyright infringement, and regardless of whether the band leader was an employee of the dance hall owner¹⁵⁾.

Japanese law does not have a legal provision that recognizes liability as broad as America's vicarious liability, but it does have a similar provision in Article 715 of the Civil Code (user liability). This provision is a form of vicarious liability in which a legal fiction of the "nature of an infringer" is created under certain necessary conditions and the user bears liability for damages. Thus, in type 2 it is proper that the focus on the "nature of an infringer" is basically according to Article 715 of the Civil Code.

(3) According to the usual view, which seeks the basis of Article 715 of the Civil Code from the fact that the employer has the employee under its control and makes profit by extending the scope of its social activities, the expression "person who employs someone else" in this provision is taken to refer to a relationship between the employer and the employee that is essentially one of control and supervision.

Therefore, Article 715 of the Civil Code applies if the provider of the place and opportunity substantially has the right of control and supervision over the direct infringer of a copyright, as in a case where the owner of a hall himself plans a concert and has the music performed under his own specific control.

This presents the distinguishing characteristic of whether there is in substance a relationship of control and supervision between the provider of the place and opportunity and the direct infringer.

(4) However, even if there is a relationship of control and supervision, the provider of the place and opportunity is exempt from tort liability "if that person exercises proper care concerning the selection of employees and supervision of their work or injury occurs despite exercising proper care" (proviso of Article 715, paragraph 1 of the Civil Code).

It seems that if there is a relationship of control and supervision between the provider of the place and opportunity and the direct infringer, then because the provider of the place and opportunity has the right to investigate the acts of those who make use of the place and opportunity to demand a change if such acts are improper, then not only should instructions and guidance be given, such as in a contract, so that copyright infringement is not committed, butif an infringement or danger thereof is discovered, it is proper to even impose the obligation to require avoidance thereof.

This presents the distinguishing characteristic of whether the provider of the place and opportunity properly looks into the existence of any copyright infringement by the user and takes action. Moreover, if the provider of the place, etc. later receives from the copyright holder, etc. a warning concerning copyright infringement, then ignoring such a warning is understood to constitute grounds for denying application of the proviso of Article 715, paragraph 1 of the Civil Code.

(5) If there is no substantial relationship of control and supervision between the provider of the place and opportunity and the direct infringer, does the provider of the place and opportunity not bear any liability for damages?

On this point, the majority opinion in the Supreme Court decision in the Club Cat's Eye case holds as follows (summary):

"Since employees, etc. offer enticement for singing and operate the karaoke equipment, and the intention is to thereby increase the business profit of the snack bar, etc., even singing by customers may be considered, from the standpoint of regulations under the Copyright Law, to be the same as singing by the manager, etc. of the snack bar, etc."

In the above case, there is a special aspect in the relationship with Article 17 of the Copyright Law supplementary provisions, and there is the view that playing a karaoke tape should in itself be taken to be an infringement of the right of musical performance. However, if the matter is considered as a general problem without being limited to karaoke accompaniment, the above majority opinion is suggestive. That is, it is considered that even if there is no substantial relationship of control and supervision between the provider of the place and opportunity and the direct infringer, and Article 715 of the Civil Code is not applied, if there is an act of active assistance, such as inducement by the provider to acts that entail copyright infringement, then the "nature of an infringer" is affirmed, and there are cases of liability for damages as a joint tortious act under Article 719, paragraphs 1 or 2 of the Civil Code.

This presents the distinguishing characteristic of whether there has been an act of active assistance, such as inducement by the provider of the place and opportunity to perform acts that entail copyright infringement.

4) Type 3 (transmission of copyright-infringing works)

(1) This type includes various modes, but the one that is most fraught with unresolved problems in the coming information society is the case of providing a network. Consequently, in the following we basically consider the problem of a network provider (such as an Internet provider)¹⁶⁾.

Figure 3

Analyzing the basic structure that the occurrence of copyright infringement involving a network might take, we have the following situation as shown in Figure 3: (1) User B transmits data to provider A, (2) the data are duplicated onto A's hard disk, (3) A's system is connected to the Internet, and (4) the data are transmitted via the Internet to user C. If B transmits a work to C without permission, then first, the right to transmit is infringed in stage (1),the right to make copies is infringed in stage (2), and the right to transmit is again infringed in stage (4) (moreover, if the "right to transfer" that is currently under study by WIPO is approved and Japan adopts it as domestic law, then the right to transfer is infringed in stage (3))¹⁷⁾.

As to who commits the infringement, although user B infringes directly in (1), provider A infringes it directly in (2) and (3). In (2) and (3), if the user basically allows copyright-infringing data to flow, the provider serves simply as a "tool" in that the data are transmitted to other users almost automatically.

Based on this relationship, we consider the user's liability and the provider's liability.

(2) First, let us consider the user who transmits the copyright-infringing data. There is no doubt that first, the user infringes the right to transmit in that he transmits data to the provider's system without permission. Moreover, if the user transmits the data, then almost automatically the provider accumulates the data on his hard disk and transmits it, so it can be said that the user utilizes the provider as a "tool" in duplicating and transmitting the copyright-infringing data, and that the user bears liability for infringement of the right to duplicate and the right to transmit.

(3) Then what liability is borne by the provider, who is used as a tool?

Legally, the provider, being merely used as a "tool," can be construed to be committing a type of "indirect infringement" as someone who renders assistance to copyright infringement through the user's act of infringing the right to duplicate and the right to transmit. However, since the provider himself infringes the right to duplicate and the right to transmit, the "nature of an infringer" of the provider is affirmed. This is because the "nature of an infringer" is a question of the relationship between the act of the acting party and the infringement of a right, regardless of whether one is used as a tool.

In the case of a typical provider, however, an enormous volume of data sent from users is duplicated and transmitted legally; only a very small portion of this data is illegal, and being undetectable, it gets duplicated and transmitted. The social role of the provider as a middleman in information communication is very useful, and viewing the acts of the provider as a whole, it would be improper to recognize a demand for damages against a provider merely because the provider has duplicated and transmitted illegal data. Thus, it is necessary to provide relief that is focused in some way on the provider's liability for damages.

The users of a network are much too numerous and unspecified for a copyright holder to deal with. However, the provider can to some extent examine the data that pass through his system (for example, he could periodically check a certain volume of randomly selected data uploaded by users), although the mediation of information by the provider always entails the danger of causing copyright infringement, and because the provider gains great economic profit as an information communication medium. In view of these facts, it is appropriate to impose on the provider an obligation to investigate to the extent possible. Futhermore it is also appropriate to hold that the provider is exempt from liability for damages only when he makes a considerable effort to prevent copyright infringement and thus is not negligent.

In the Playboy case, an American precedent that shocked the multimedia industry, the online service provider was found liable. However, it must be stressed that the provider made no effort to prevent copyright infringement, even though he could readily anticipate the copyright infringement in which his system was implicated. Although the court decision does not touch upon this point, the conclusion might have been different if Frena had devised a means to prevent copyright infringement.

This presents the distinguishing characteristic of whether the party who transfers the works has made a proper effort to prevent copyright infringement (this is one requirement for negligence in a demand for damages).

(4) What liability does a network provider bear if he later receives a warning of copyright infringement, or if a specific fact of infringement comes to be recognized?

On this point, in the Netcom case in the United States, the court found that the act of the provider constitutes contributory infringement of the right to distribute if, after a warning is received concerning an act of copyright infringement, he learns of the existence of an act of infringement by, for example, an investigation of the facts, or if he should have known of the existence of an act of infringement.

In type 3, as in type 2, copyright infringement takes place within an area under one's own control, so it is possible to conduct an investigation and also to take action, such as canceling a user's registration. The large number of users means a correspondingly greater amount of economic profit, and it is natural that one's liability should become greater, because the infringement occurs through one's own act. With respect to the situation that an infringement comes to light and then is ignored, needless to say if one receives a warning about copyright infringement from a copyright holder, ignores it, and causes copyright infringement, negligence should be recognized as a result of the negligence proper efforts to prevent the aforesaid copyright infringement, and it should be construed that the provider, etc. is not exempt from liability for "indirect infringement" of the copyright.

2 Demand for injunction

(1) Under Article 112 of the Copyright Law, a demand for injunction requires an infringement of a right or the fear thereof (whether through intent or negligence). Moreover, with regard to the "nature of an infringer," because a demand for injunction is based on the exclusivity of the copyright, this must be decided from the standpoint of whether the infringement of the right or the fear thereof will be effectively prevented by recognizing the "nature of an infringer" of the acting party and eliminating the act.

Thus, it is understood that a person against whom a demand for injunction may be made is not limited to the person who directly causes the copyright infringement or fear thereof, but any person in a position to eliminate the infringement conditions. The thinking here is in parallel with the case of a person against whom a real right may be demanded, namely, the person who actually has possession of the object without being entitled to it, or the person who is in a position to be able to eliminate the infringement conditions¹⁸⁾. In this respect, the "nature of an infringer" is essentially different from what it is in a demand for damages.

(2) From this viewpoint, it is understood that if copyright infringement actually occurs, the demand for injunction applies to the act of providing to the direct infringer the equipment and software, place and opportunity, and the network. This is true of all three types, 1, 2, and 3, regardless of whether the provided equipment and software is legally in widespread use not entailing copyright infringement, whether the relationship between the provider of the place and opportunity and the user is essentially one of control and supervision, or whether the provider of the network has made a proper effort to prevent copyright infringement. This is because the specific copyright infringement that actually occurs is prevented by eliminating these acts of provision by the provider to the direct infringer, regardless of whether any of these causes are present. Thus, for example, the copyright holder may demand in a type 1 case that the provider of equipment, etc. stop providing it to those persons who commit copyright infringement by using it, in a type 2 case that the provider of a concert hall prohibit the use of the hall by performers whose performance entails copyright infringement, and in a type 3 case that the provider cancel the user IDs of users who are committing copyright infringement.

(3) In what cases does a demand for injunction under Article 112 of the Copyright Law apply generally to the act of providing equipment and software, place and opportunity, or a network, etc., including the act of providing them to others as well as to a person who directly infringes a copyright?

To say that the "nature of an infringer" in a demand for injunction is to be decided from the standpoint of whether the infringement of a right or the danger thereof is effectively prevented by recognizing the "nature of an infringer" in the acting party and eliminating his act is to say, in other words, that if the "nature of an infringer" is recognized, then it is recognized that the act of the acting party causes or is likely to cause copyright infringement. Moreover, the act of providing equipment, etc. to persons other than direct infringers is a matter of whether this is"likely" to cause copyright infringement, and in assessing this "likelihood" there is no alternative but to judge the circumstances separately in each specific case.

For example, the U.S. Supreme Court decision in the Betamax case, the determination of the nature of an infringer of copyright elucidated the hallmark question of whether the equipment, etc. is legally in widespread use not entailing copyright infringement, in a form in which no distinction is made between the "nature of an infringer" for the purposes of demanding copyright damages and the "nature of an infringer" for the purposes of demanding injunction. On the other hand, the decision in the first trial of the Midway v. Strohon case in the United States (a case of demand for provisional disposition of prohibition of sales) denied copyright infringement of the audiovisual portion, in the following words:

"Certainly if the purchaser, not complying with the instructions, does not delete ROM5F on the printed circuit board, the characters and screens of the game will greatly resemble Pacman, the use of Cute C will constitute a copyright infringement, and Slayton may be an indirect infringer. But in this case Slayton does not foresee or recommend that the purchaser infringe the copyright of Midway's audiovisual works. On the contrary, Slayton gives instructions to incorporate a modification kit so that the purchaser will not infringe the copyright."

Thus, the questions of whether the equipment and software, the place and opportunity, or the network, etc. are in widespread use without being accompanied by copyright infringement, and whether the provider properly instructs and guides users not to cause copyright infringement, are taken to be very important elements in delineating the scope of a demand for injunction, and these are considered in a comprehensive manner in deciding whether one may make a demand for injunction.

As discussed above, the key features for "indirect infringement" of a copyright can be summarized in the following charts.

<Demand for Damages>

I.	Type 1 (provision of equipment and software used for copyright infringement) Is the equipment or software legally in widespread use for purposes for which there is no objection?
	Yes		There is no "nature of an infringer"
	No		The "nature of an infinger" exists.
	Has the provider given instructions and guidance to the user not to commit any copyright infringement?.
	Yes		There is no negligence
	No		Negligence exists Liability for damages (Civil Code, Article 719) *Ignoring a warning, etc. constitutes subsequent negligence.
II.	Type 2 (provision of place and opportunity for copyright infringement) Is there a substantial relationship of control and supervision between the provider of the place and opportunity and the direct infringer?
	Yes		Question of Article 715 (legal fiction of the nature of an infringer)
	Has a proper investigation been made into whether there has been copyright infringement by the user, and has action been taken?
	Yes		Exemption from liability (Civil Code, Article 715, paragraph 1 proviso)
	No		Liability for damages (Civil Code, Article 715 paragraph 1)
	*Ignoring a warning, etc. subsequently eliminates the exemption from liability under the proviso of Article 715.
	No		Article 715 does not apply.
	Has there been an act of active assistance concerning copyright infringement?
	Yes		The "nature of an infringer" exists. Liability for damages (Civil Code, Article 719)
	No		There is no "nature of an infringer"
III.	Type 3 (transfer of copyright-infringing works) The "nature of an infringer" is affirmed because one is actually committing a copyright infringement. Has a proper effort been made to prevent copyright infringement?
	Yes		There is no negligence.
	No		Negligence exists. Liability for damages (Civil Code, Article 715) *Ignoring a warning, etc. is equivalent to lack of effort.

<Demand for Injunction>

Act of providing to direct infringers Constitutes an object of a demand for injunction. General act of providing, including persons other than direct infringers Judged individually and specifically, taking the following circumstances into consideration - Is it legally in widespread use not entailing a copyright infringement? - Have instructions and guidance been properly given so that no copyright infringement occurs?

The above classifications and key features are no more than a tentative theory, but it may help those involved in the multimedia industry as a standard for future behavior and future disputes. It is hoped that this essay will serve as an occasion for further research into "indirect infringement" of copyrights.