Reposted from Sports, Media and Entertainment Online

By Keitaro Uzawa and Ann Cheung

The Ministry of Economy, Trade and Industry of Japan (“METI“) recently revised the Interpretative Guidelines on Electronic Commerce and Information Property Trading (“Guidelines“), which apply to all online business operations in Japan and clarify how the Civil Code, which governs Japanese commercial contracts, and other relevant laws, such as the Act on Special Provisions to the Civil Code Concerning Electronic Consumer Contracts and Electronic Acceptance Notice (Act No. 95 of 2001) (“Electronic Contract Act“) and the Act on Specified Commercial Transactions (Act No. 57 of 1976), are applied to various legal issues relating to electronic commerce and information property trading.

Existing sections of the Guidelines have been amended to provide detailed guidance on certain issues surrounding electronic commerce.  The following existing sections of the Guidelines have been amended:-

  • Mistakes caused by consumers’ erroneous operations (please see Point 1 below for an overview)
  • Expressions of intentions by minors (please see Point 2 below for an overview)

New sections have been added to the Guidelines in order to clarify confusion surrounding end-user license agreements between operators and users in relation to the distribution and streaming of digital contents (including electronic publications, music, online games, videos, etc.) on the internet.  The following sections have been added to the Guidelines:-

  • Definition of “digital contents” (please see Point 3 below for an overview)
  • Legal issues concerning the provision of digital contents on the internet (please see Point 4 below for an overview)
  • Use of digital contents after termination of a digital contents end-user license agreement (please see Point 5 below for an overview)
  • Obligation of operators to redistribute electronic publications (please see Point 6 below for an overview)
  • Rights in relation to cybernetic items in online games (please see Point 7 below for an overview)

Point 1: Issues with BtoC Electronic Contracts in Relation to Mistakes Caused by Consumers’ Erroneous Operations  

In relation to BtoC electronic contracts, the Guidelines clarify that in order to satisfy the requirements of “confirmation seeking measures” under Article 3 of the Electronic Contract Act, although e-commerce site operators are not required to display a final confirmation page, they are required to show all the information that has been entered by a user and indicate that clicking a certain button will constitute such user’s final expression of intention to confirm and effect such transaction. 

Point 2: Minors and Underage Persons

There have been frequent breaches of Japanese laws in cases where minors or underage persons attempt to play certain online games by entering a false age in order to gain access to such digital contents.  The amended Guidelines clarify that any contracts entered into by minors or underage persons who are lack of mental capacity (even if such persons attempt to deceive operators by declaring a false age) are invalid.  Whether the declaration of their age is false or not should be assessed not only by the input data, but also by considering various factors, including the age of the person in question, the nature of the goods or services to be provided, the target users of the goods or services, and the design of the age confirmation page on the website. 

Point 3: Definition of “Digital Contents

Since there are various types of media for digital contents, it is difficult for the Guidelines to cover all digital contents, thus, the Guidelines only address certain digital contents.  The Guidelines define “digital contents” as contents distributed via the internet, such as online games, e-books, music streaming and video streaming.  Therefore, contents provided by hard media, such as compact discs and digital video discs, are out of the scope of the Guidelines. 

Point 4: Legal Issues Concerning Provision of Digital Contents on the Internet

Uploading any works of others (including legally obtained digital contents) without permission of the owner of the copyright and associated rights (e.g. the act of uploading music or video to sharing sites) on the internet and providing them to the public constitute infringement of rights, unless they fall within certain exceptions (e.g. copying for private use, copying for educational use, and quotation) under the Copyrights Act (Act No. 48 of 1970).  Such action of uploading and sharing with the public on the internet may also constitute infringement of the right of reproduction.

Downloading such works (e.g. downloading music or video from sharing sites on the internet) knowing that the right holder’s consent has not been granted in relation to such uploading or sharing also constitutes infringement of the right of reproduction.  Infringement of copyrights and associated rights occurs even if such works are provided to the public at no charge. 

Point 5: Use of Digital Contents after Termination of End-user License Agreement in Relation to the Use of Digital Contents

In the provision of services in relation to streaming-type digital contents (i.e. digital contents that are supposed to be accessible by users only when they are connected to the servers of the operator), the user cannot use digital contents after termination of the end-user license agreement because any reproduced copies of electronic data are usually not stored or will usually not remain in the user’s hard drive.  On the other hand, in the provision of services in relation to downloadable contents (i.e. reproduced copies of electronic data are transferred from the operator to the user and electronic data remain with the users after termination of data communication between users and operators), the user may continue to use electronic data held by the user after termination of the relevant end-user license agreement.  Accordingly, as it is not clear if this continuous use of digital contents is permitted or not, the Guidelines describe several scenarios to illustrate the rights to use digital contents for each type of termination.

Scenario 1: Termination of an End-user License Agreement by the Operator Due to Default by the User

If an end-user license agreement is terminated due to default by the user, such user will lose all their rights to use the relevant digital contents.  Accordingly, the user must stop using such digital contents.  The operator may require the defaulting user to erase or return all relevant digital contents. 

Scenario 2: Termination of an End-user License Agreement by the Operator Due to Termination of Digital Contents Providing Services

In relation to the handling of digital contents after termination of an end-user license agreement, if there are specific provisions in such agreement, unless such agreement has become invalid or is revoked, the digital contents should be handled in accordance with the relevant provisions of such agreement.  If there is no post-termination provision in the end-user license agreement, the operator’s obligations to provide digital contents covered by such agreement will become void.  Accordingly, the non-delivery of digital contents by the operator will not be considered as a default on the part of the operator.  In relation to downloadable digital contents, the user’s right to request the operator to provide digital contents will lapse, however, the user will not be required to erase or return the digital contents.

Scenario 3: Invalidity and Revocation of an End-user License Agreement in Relation to the Use of Digital Contents

If an end-user license agreement in relation to the use of digital contents becomes invalid or is revoked, both the user and the operator will have the obligations to return any unjust enrichments, which means that the operator has to return the purchase price to the user, and the user has to erase or return the purchased digital contents to the operator.

Point 6: Obligation of Operators to Redeliver Electronic Publications

Digital contents, especially electronic publications, are only available on platforms of electronic publication distributors in many cases, and it may be technically difficult for users to create copies of electronic publications on their own.  Therefore, if a digital terminal fails and a replacement of any digital terminal is required, or if any electronic publication is erased from a digital terminal due to constraints in its storage capacity, users may be required to receive the redelivery of electronic publications from electronic publication distributors.

If there is a contract between users and electronic publication distributors, the existence of any obligation of redelivery and its scope will be governed by the terms of use in such contract.  If such provision does not exist in the agreed terms of use, whether there is any implied obligation of redelivery will depend on the circumstances and the reasonable interpretation of such terms of use. 

Point 7: In-game Items of Online Games

Although users often purchase in-game items for use in online games, since in-game items of online games are legally regarded as “information” in practice, legal ownership of in-game items of online games is not recognized in Japan.  Subject to any contract between a user and an operator, the rights of users of in-game items of online games are protected by Japanese laws.

If any interruptions or terminations of online game services occur immediately after a user has purchased for an in-game item, even if the operator has issued any prior notice in relation to such interruption or termination, due to the placement of the in-game items in the online games, the operator will still be liable for damages arising from such default.

Even if a user has paid for an in-game item and their right to use such in-game item is interrupted or terminated due to any failure of an online gaming system, since it is inevitable that there will be problems with systems of service providers of online games, it does not necessarily mean that the operator of such online gaming system will automatically bear all obligations and responsibilities in relation to any disappearance or loss of the paid in-game items.

However, if any failure of an online gaming system is caused by any intentional or grossly negligent act of its operator, even if there exists any waiver of damages, the operator will still be liable for damages for the disappearance or loss of any purchased item.

For more information, please contact Keitaro Uzawa or Ann Cheung.