Competition / Antitrust Law

False IP Takedowns on Japanese E-Commerce Platforms: UCPA Liability & Risk-Control Guide

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read
Slide summarising Japan’s rules on false IP takedowns: UCPA Art. 2(1)(xxi) test, 2024 Osaka High Court case facts, duty-of-care checklist for platform users.

TL;DR

  • Filing baseless IP-infringement reports on Japanese e-commerce platforms can breach the Unfair Competition Prevention Act (UCPA) Art. 2(1)(xxi).
  • An Osaka High Court ruling (26 Jan 2024) held a competitor liable for negligent, false copyright claims that triggered listing suspensions.
  • Rights-holders must verify ownership, investigate infringement and document their basis before reporting; targets can sue for damages.

Table of Contents

  1. The Legal Framework: Unfair Competition Prevention Act (UCPA)
  2. Interaction with IP Rights
  3. Copyrightability of Product Photographs
  4. Case Study: False Copyright Reports on an E-Commerce Platform (Osaka High Court, Jan 26 2024)
  5. Duty of Care When Reporting IP Infringement on Platforms
  6. Comparison with US Law (DMCA § 512(f))
  7. Practical Implications for Businesses on Japanese E-Commerce Platforms
  8. Conclusion

The rise of massive e-commerce platforms has revolutionized retail, providing unprecedented access to global markets for businesses of all sizes. However, these platforms also present unique challenges for intellectual property (IP) enforcement. While platforms typically offer tools for rights holders to report alleged infringements and request the removal of listings (takedowns), these mechanisms can sometimes be misused, accidentally or intentionally, by competitors seeking an unfair advantage.

When a competitor files a baseless IP infringement claim – asserting rights they don't have or claiming infringement where none exists – the targeted seller can suffer significant harm, including temporary or permanent listing suspension, loss of sales, and damage to their business reputation. In Japan, one key legal avenue for addressing such situations is the Unfair Competition Prevention Act (UCPA), which prohibits the dissemination of false information detrimental to a competitor's business. A recent decision by the Osaka High Court (January 26, 2024) provides valuable insights into how Japanese courts analyze these disputes, particularly concerning copyright claims over product images used on e-commerce platforms.

Japan's UCPA (不正競争防止法 - fusei kyōsō bōshi hō, Act No. 47 of 1993, as amended) aims to ensure fair competition among businesses. Among its various provisions defining acts of unfair competition, Article 2, Paragraph 1, Item 21 (formerly Item 14 prior to a 2018 amendment numbering change) specifically addresses the issue of trade libel or commercial disparagement. It prohibits:

"the act of making or circulating a false statement detrimental to the business reputation of another person in a competitive relationship" (競争関係にある他人の営業上の信用を害する虚偽の事実を告知し、又は流布する行為 - kyōsō kankei ni aru tanin no eigyō-jō no shin'yō o gaisuru kyogi no jijitsu o kokuchi shi, mata wa rufu suru kōi).

To establish a claim under this provision, a plaintiff generally needs to show:

  1. Competitive Relationship: The plaintiff and defendant are competitors.
  2. False Statement: The defendant made or circulated a statement of fact that is false.
  3. Detrimental to Business Reputation: The false statement is injurious to the plaintiff's business reputation or creditworthiness.
  4. Intent or Negligence: While not explicitly in Article 2, establishing liability for damages under Article 4 generally requires showing the defendant acted with intent or negligence.

Interaction with IP Rights

Asserting one's intellectual property rights against a competitor is, in principle, a legitimate act. However, if the assertion is based on false premises, it can cross the line into unfair competition under the UCPA. This can occur if:

  • The party asserting the right does not actually own valid IP rights (e.g., claiming copyright in something uncopyrightable, or asserting an invalid patent/trademark).
  • A valid IP right exists, but the competitor's product or activity clearly does not infringe that right, and the assertion of infringement is therefore factually false.

Sending cease-and-desist letters containing false infringement claims or, more relevantly here, filing false infringement reports directly with an e-commerce platform, can constitute the "making or circulating" of a false statement under the UCPA. If this false statement harms the competitor's business reputation (e.g., by causing listing suspensions or damaging relationships with the platform or customers), liability can arise.

Copyrightability of Product Photographs

In disputes involving e-commerce listings, the IP right asserted is often copyright in product photographs. Under Japanese copyright law, a photograph qualifies for protection as a "work" (著作物 - chosakubutsu) if it is "a production in which thoughts or sentiments are expressed in a creative way" (Copyright Act, Art. 2(1)(i)).

For product photographs, this means simply taking a straightforward, documentary-style picture to faithfully represent the product might not involve sufficient creativity to warrant copyright protection. However, if the photographer makes creative choices regarding subject selection, combination, arrangement, lighting, shading, angle, background selection, etc., resulting in an image that expresses their individual personality or aesthetic judgment, copyrightability can be recognized. This is a fact-specific inquiry.

The Osaka High Court decision provides a concrete example of these principles in action.

Scenario

The case involved two companies selling similar products (accessories related to popular culture fandoms) on a major e-commerce platform (reported to be Amazon Japan, though the court decision anonymizes it). Let's call them Company Y (the defendant/reporter) and Company X (the plaintiff/target). Company Y used the platform's standard IP infringement reporting tool, submitting multiple notices claiming that product images used by Company X infringed Company Y's copyrights in its own product photos. As is common practice on many platforms operating under notice-and-takedown systems, the platform acted on these reports and temporarily suspended Company X's listings for the accused products. Company X subsequently sued Company Y, alleging the infringement reports constituted the dissemination of false facts injurious to its business reputation under UCPA Article 2(1)(xxi) and seeking damages for lost sales and other harm.

Court's Findings

The Osaka High Court largely upheld the lower court's finding in favor of Company X, concluding that Company Y's reports constituted unfair competition. Key points of the High Court's reasoning included:

  1. Copyrightability Analysis: The court examined the product photographs submitted by Company Y as the basis for its copyright claims. It found that most of Company Y's photos were simple, frontal shots aimed at faithfully reproducing the appearance of planar products and lacked the necessary creativity for copyright protection. However, one specific photo (Y Image 3 in the case) was deemed copyrightable. This photo involved arranging multiple components of the product (flashcards featuring celebrity photos) in a specific, fan-like configuration against a plain background, creating unique shading and visual effects. The court acknowledged that such arrangements might be common for showcasing this type of product online, but held that the specific choices in combination, placement, lighting, shading, and background selection reflected the photographer's individual personality and thus met the threshold for copyrightability.
  2. Infringement Analysis: Despite finding one of Company Y's photos copyrightable, the court then compared it to the corresponding photo used by Company X (X Image 3). It concluded that Company X's photo was not substantially similar to Company Y's protectable photo in terms of its essential expressive features. Therefore, no copyright infringement had occurred.
  3. Falsity of Reports: Since Company Y's reports claimed copyright infringement where either (a) no valid copyright existed in the asserted photo or (b) a valid copyright existed but there was no infringement by Company X, the statements made in the infringement reports were determined to be objectively false.
  4. UCPA Violation: Given that Company X and Company Y were direct competitors on the platform, and Company Y's false reports directly led to harm to Company X's business reputation and operations (via listing suspension), the court concluded that Company Y's actions constituted the "making or circulating a false statement detrimental to the business reputation of another person in a competitive relationship" under UCPA Article 2(1)(xxi).

Duty of Care When Reporting IP Infringement on Platforms

A crucial aspect of the Osaka High Court's decision was its discussion of the duty of care owed by those submitting IP infringement reports via platform tools.

The Court's Standard

The court noted that the platform's reporting form required the submitter (Company Y) to declare, under penalty of perjury, that they had an objective basis for believing infringement occurred and that the information provided was accurate. Crucially, the court emphasized that because filing such a report could clearly lead to direct economic harm for the targeted seller (listing suspension), the reporter assumes a duty of care to reasonably investigate and consider the objective basis for their infringement claim before submitting the report.

Negligence and Intent

Applying this standard, the court found that Company Y had breached its duty of care. It determined that a reasonable investigation would have easily revealed that its claims were baseless (either due to lack of copyrightability or lack of infringement). There was no evidence Company Y undertook such an investigation.

Furthermore, considering the history and context of the reports, the court inferred that Company Y's motive was likely not the good-faith enforcement of legitimate rights, but rather an attempt to gain a competitive advantage by disrupting Company X's business. This finding supported the conclusion that Company Y acted, at a minimum, with negligence, satisfying the requirement for liability for damages under the UCPA. The court explicitly stated that simply claiming difficulty in judging copyrightability is not an excuse; if unsure, the reporter should consider consulting a legal expert before filing a potentially damaging report.

Comparison with US Law (DMCA § 512(f))

The approach under Japan's UCPA can be contrasted with the primary US mechanism for addressing false copyright takedown notices under the Digital Millennium Copyright Act (DMCA).

  • DMCA Section 512(f): This provision creates liability for any person who "knowingly materially misrepresents" in a DMCA takedown notice (or counter-notice) that material or activity is infringing (or was removed by mistake). Liability includes damages, costs, and attorneys' fees incurred by the alleged infringer (or copyright holder in the case of a false counter-notice) who is injured by such misrepresentation.
  • "Knowing Misrepresentation" Standard: The key difference lies in the required mental state. US courts have generally interpreted "knowingly materially misrepresents" to require proof of actual knowledge of the falsity or subjective bad faith on the part of the reporter. This is a higher bar than the negligence standard applied by the Japanese court under the UCPA analysis in the Osaka High Court case. While some US courts have flirted with concepts like "willful blindness" (deliberately ignoring facts suggesting non-infringement, such as fair use) potentially meeting the standard, proving subjective knowledge or bad faith remains a significant hurdle for § 512(f) claimants.
  • UCPA Focus on Objective Falsity and Harm: The Japanese approach under UCPA Art. 2(1)(xxi), as interpreted in this case, focuses more on the objective falsity of the infringement claim and the resulting harm to the competitor's business reputation. While negligence or intent is needed for damages, the initial finding of an "unfair competition" act appears based on the objective falsehood and competitive harm, coupled with a breach of a duty of care by the reporter.

This suggests that it might be comparatively easier to establish liability for a damagingly false IP report under Japan's UCPA (based on negligence and objective falsity) than under the DMCA's § 512(f) (requiring knowing misrepresentation).

Practical Implications for Businesses on Japanese E-commerce Platforms

The Osaka High Court decision offers important takeaways for businesses operating on platforms like Amazon Japan, Rakuten Ichiba, Yahoo! Shopping, etc.:

For Rights Holders Considering Reporting Infringement:

  • Exercise Due Diligence: Before submitting an IP infringement report, conduct a reasonable investigation.
    • Verify Rights: Confirm you own valid, enforceable IP rights (e.g., Is the copyright in the photo original enough? Is the trademark registered and in force for the relevant goods/services?).
    • Assess Infringement: Objectively evaluate whether the competitor's listing actually infringes your rights. For copyright, does it copy protectable creative expression? For trademarks, is there a likelihood of consumer confusion? Simple product similarity is often not enough.
    • Consider Defenses: Briefly consider obvious defenses the target might have (though an exhaustive analysis isn't required).
  • Use Platform Tools Carefully: Understand the declarations you are making when using platform reporting forms. Be aware that these declarations, combined with the potential harm caused by takedowns, create a duty of care under Japanese law.
  • Document Your Basis: Keep records of your investigation and the rationale for believing infringement occurred. This can help defend against potential UCPA claims.
  • Consult Experts: If unsure about copyrightability, infringement, or the reporting process, seek advice from qualified IP counsel in Japan before filing a report that could harm a competitor. Acting on incorrect assumptions carries legal risk.
  • Avoid Anti-competitive Motives: Using infringement reports primarily to harass competitors or disrupt their business, rather than enforce legitimate rights, significantly increases the risk of liability under the UCPA.

For Sellers Targeted by Potentially False Reports:

  • Understand Your Rights: Be aware that if a competitor files a baseless IP infringement report that harms your business (e.g., gets your listing suspended), you may have recourse under Japan's UCPA Art. 2(1)(xxi).
  • Gather Evidence: Document the report, the resulting platform action (suspension), communications with the platform and the reporter, and evidence of the report's falsity (e.g., proof of your own independent creation, evidence the reporter lacks valid rights, analysis showing non-infringement). Quantify damages (lost sales, reputational harm).
  • Communicate with the Platform: Utilize the platform's counter-notice or appeal procedures, providing evidence that the report was inaccurate.
  • Consider Legal Action: If significant harm has occurred due to a demonstrably false and potentially negligent or bad-faith report, consult with Japanese legal counsel about pursuing a claim for damages under the UCPA.

Conclusion

E-commerce platforms provide essential tools for IP rights enforcement, but these tools carry responsibilities. The Osaka High Court's decision underscores that in Japan, filing baseless IP infringement reports against competitors can constitute unfair competition under the UCPA, leading to liability for damages. The ruling highlights that rights holders using platform reporting mechanisms have a duty to conduct a reasonable investigation into the merits of their claim before submitting a report that can cause significant economic harm to competitors. For US businesses operating as sellers or rights holders on Japanese e-commerce platforms, understanding the nuances of both IP law and unfair competition law, exercising due care in enforcement actions, and knowing the potential recourse against baseless accusations are critical components of navigating this dynamic marketplace successfully.