Renting and Lending in Japan: How Do Rental and Lending Rights (Taiyo-ken) Work for Copyrighted Materials?

Japanese Attorney at Law - Bengoshi L.L.

• 8 min read

While the right to control the sale or transfer of copies of a copyrighted work is a familiar concept, the right to control the subsequent commercial rental or lending of those copies is treated differently in various legal systems. In Japan, copyright holders are granted a distinct "right of lending" (貸与権 - taiyo-ken) under Article 26-3 of the Japanese Copyright Act (著作権法 - Chosakuken-hō). This right allows them to authorize or prohibit the offering of their works to the public by lending copies. Understanding the scope of this right, its exceptions, and how it differs from the treatment of sales is crucial for businesses involved in any form of rental or lending activity in Japan, as well as for libraries and educational institutions.

The Right of Lending (Taiyo-ken) – Article 26-3

Article 26-3 states: "The author shall have the exclusive right to offer his work (except a cinematographic work) to the public by lending copies of the work (excluding copies of a cinematographic work, in the case of a work reproduced in the cinematographic work)."

Rationale and Scope

The taiyo-ken was introduced to address the economic impact of rental markets, particularly for works like sound recordings and books, which were seen as facilitating repeated use and potentially widespread private copying without further compensation to copyright holders beyond the initial sale of a copy. The rise of commercial record rental shops in the 1980s was a significant impetus for its establishment.

Key aspects of this right include:

  • Applicable Works: The right of lending applies to most types of copyrighted works, such as literary works (books, magazines), musical works (sheet music), and sound recordings (CDs).
  • Exclusion of Cinematographic Works: A major carve-out is for "cinematographic works" (映画の著作物 - eiga no chosakubutsu), which include films, videos, and most video games. The lending of copies of cinematographic works is covered by the broader "right of distribution" (頒布権 - hampu-ken) under Article 26 of the Act. This distinction is important because the rules, particularly around exhaustion, can differ.
  • "Lending" (貸与 - taiyo): The term "lending" is defined broadly in Article 2(8) of the Act. It includes "any act of making a work available for use under any name or by any method, which has the same effect as... lending." This means that transactions structured, for example, as a sale with a buy-back agreement at a price reflecting a rental fee could still be considered "lending" if their economic substance is equivalent to a rental. The Tokyo District Court's provisional disposition in the Nobunaga's Ambition case (April 6, 1987), concerning game software rentals structured as sales with buy-back options, illustrates this substantive approach.
  • "To the Public" (公衆に - kōshū ni): The lending must be directed "to the public." Article 2(5) defines "the public" to include unspecified persons or specified persons who are numerous. Therefore, purely private lending among a small circle of friends would not infringe this right. However, a business engaging in lending activities, even if lending to another specific business, could be considered lending "to the public" if it's part of their general offering. The Tokyo District Court in the NTT Lease case (June 18, 2004), found that equipment leasing within a corporate group could constitute lending "to the public" where the entities were distinct and the leasing was part of a broader business.
  • "Copies" (複製物 - fukuseibutsu) of the Work: The right applies to the lending of copies of the work. Some legal commentary argues that "copies" in this context should also be understood to include original works, as an original is effectively one embodiment (or copy) of the intangible work, and there's little reason to exclude lending of originals from this right if lending of other copies is controlled.

No General Exhaustion for the Right of Lending

A critical feature of the Japanese right of lending—and a significant point of divergence from the treatment of sales—is that it is generally not subject to the principle of exhaustion (often known as the "first sale doctrine" in the U.S.).

  • Right of Transfer (譲渡権 - jōto-ken) vs. Right of Lending (Taiyo-ken): For the "right of transfer" (Article 26-2), which governs the sale and other transfers of ownership of copies, Japanese law recognizes an exhaustion principle. Once a copyright holder (or someone with their authorization) has lawfully sold a copy of a work to the public, their right to control further transfers of that particular copy is generally exhausted (Article 26-2(2)). The new owner can typically resell that copy without needing further permission.
  • Lending Right Persists: In contrast, Article 26-3 (right of lending) does not contain a similar exhaustion provision. This means that even if a copy of a book or a CD has been lawfully purchased, the purchaser does not automatically acquire the right to commercially lend that copy to the public. Such commercial lending still requires the authorization of the copyright holder (or must fall under a specific statutory exception or licensing scheme).

The rationale for not applying a general exhaustion principle to the right of lending stems from the view that lending involves a different mode and intensity of exploitation than a one-off sale. Lending facilitates repeated use of a single copy by multiple individuals, potentially displacing sales and increasing opportunities for private copying, for which the initial sale price of the copy might not adequately compensate the copyright holder.

Exceptions and Limitations to the Right of Lending

Despite its non-exhausted nature, the right of lending is subject to important limitations:

1. Non-profit Lending by Designated Institutions (Article 38(4))

This is the most significant statutory exception. Article 38, Paragraph 4 states: "It shall be permissible to offer to the public a work already made public (except a cinematographic work) by lending copies thereof (excluding, in the case of a work reproduced in a cinematographic work, copies of said cinematographic work) for non-profit-making purposes and without charging any fees to borrowers."

  • Scope: This allows designated institutions, such as public libraries and certain educational facilities (as specified by Cabinet Order), to lend out copies of published works (e.g., books, CDs) to the public without infringing the copyright holder's lending right, provided the lending is:
    • Non-profit-making: The institution itself must not be operating the lending service for profit.
    • Free of charge to borrowers: No rental fees can be charged to the individuals borrowing the items.
  • Exclusion: Again, cinematographic works are excluded from this specific provision. Non-profit lending of films by certain audiovisual educational facilities is addressed separately under Article 38(5) and often involves a remuneration requirement.

2. On-Premises Use (Not Considered "Lending")

Certain situations where copyrighted materials are made available for use on an establishment's premises are generally not considered "lending" under the Copyright Act because legal possession of the copy is not transferred to the user in a way that they can take it off-premises.

  • Examples: Reading a magazine in a doctor's waiting room or a café, Browse books in a bookstore, or reading manga in a manga kissa (manga café). In these scenarios, because the user does not take the physical copy away, the act is typically viewed as providing an on-site reading service rather than "lending" that would trigger Article 26-3.

3. Incidental/Embedded Works in Rented Goods

A nuanced issue arises with copyrighted works embedded within goods that are primarily rented for other purposes, such as software in a rental car or pre-loaded music on a rented audio device. Some legal commentary suggests that if the copyrighted work is not the main object of the lending transaction and its presence is merely incidental or ancillary to the function of the rented good, the right of lending should not apply to such embedded works. The focus of the transaction is the car or the device, not the software or music as a standalone item for lending.

Specific Categories of Works and Historical Context

  • Books and Magazines: Historically, there was a period when books and magazines were statutorily exempt from the lending right under a supplementary provision (former Fusoku Article 4-2). This allowed commercial book rental businesses to operate without direct copyright holder permission for lending. However, this exemption was abolished by a 2004 amendment. Since then, the commercial rental of books and magazines falls under the scope of the right of lending, requiring authorization from copyright holders.
  • Sound Recordings (CDs, etc.): The commercial rental of sound recordings was one of the primary drivers for the creation of the lending right. For these works, while the exclusive right exists, there is also a system in place (often involving collective management organizations) that allows for commercial rental subject to the payment of remuneration to copyright holders (authors, composers, performers, and record producers). This effectively creates a compulsory or statutory licensing scheme for CD rentals.

Interaction with Cinematographic Works (Films, Videos, Games)

As repeatedly mentioned, Article 26-3 explicitly excludes cinematographic works. The public offering of cinematographic works by lending copies is governed by the broader "right of distribution" (hampu-ken) under Article 26.

The right of distribution for cinematographic works does include the right to lend copies. However, it also includes the right to transfer ownership (sell copies). The Supreme Court decisions in the Used Game Soft cases (April 25, 2002) established that the right of distribution for the purpose of transfer of ownership (i.e., sale) of copies of cinematographic works (specifically, video games in those cases, which are treated as cinematographic works) is exhausted after the first authorized sale of a copy within Japan, provided the copies are intended for private home use rather than public screening. This allows for a secondary market in used games and videos intended for home viewing.

However, this exhaustion principle established for sales of cinematographic works does not automatically extend to the lending aspect of the distribution right for such works. Commercial rental of films, DVDs, and games generally still requires authorization from the copyright holder.

Practical Implications for Businesses

The nuances of the taiyo-ken have several practical implications:

  • Commercial Rental Businesses: Businesses wishing to commercially rent out copies of books, non-film sound recordings, or other non-cinematographic works must obtain licenses from the respective copyright holders.
  • Libraries and Educational Institutions: Public libraries and qualifying educational institutions can rely on Article 38(4) for non-profit, free lending of most published works (excluding films).
  • Businesses Providing On-Premises Amenities: Businesses like cafes, salons, or hotels that provide books or magazines for on-site reading generally do not need to worry about the lending right, as this activity is not typically considered "lending."
  • Digital Lending: The application of taiyo-ken to the "lending" of digital files (e.g., e-books, digital audio) is an evolving area. While traditional taiyo-ken focuses on physical copies, digital lending models often involve aspects of public transmission and reproduction rights as well, and specific licensing terms are usually paramount.

The U.S. approach to lending and rental differs significantly due to the First Sale Doctrine, codified in 17 U.S.C. § 109(a). This doctrine generally allows the owner of a lawfully made copy of a copyrighted work to sell or otherwise dispose of the possession of that copy without the authority of the copyright owner. This means that, in principle, someone who buys a book or a CD in the U.S. is free to lend, rent, or resell that specific copy.

However, the U.S. has specific statutory exceptions that curtail the First Sale Doctrine for certain types of works, bringing its effect closer to Japan's taiyo-ken in those limited areas:

  • Commercial Rental of Computer Programs: The Computer Software Rental Amendments Act of 1990 generally prohibits the commercial rental, lease, or lending of computer programs without the copyright holder's permission (with exceptions for non-profit libraries and educational institutions, and for programs embodied in machines or products that cannot be copied in their ordinary use).
  • Commercial Rental of Sound Recordings: The Record Rental Amendment of 1984 similarly prohibits the commercial rental of phonorecords of sound recordings without authorization (again, with library exceptions).

So, while the U.S. starts from a general principle of allowing lending of purchased copies under the First Sale Doctrine, it carves out exceptions for commercial rental of software and sound recordings. Japan, for non-cinematographic works, starts with an exclusive right of lending that is not exhausted by the first sale, and then provides an exception for non-profit lending by certain institutions. This reflects a fundamentally different baseline for controlling the rental market.

Conclusion

The right of lending (taiyo-ken) under Japanese copyright law is a distinct exclusive right that grants copyright holders significant control over the commercial rental and lending of most types of copyrighted works, separate from the right to control sales. Its non-exhaustion after the first sale of a copy means that businesses cannot assume that purchasing a work allows them to freely rent it out. While exceptions for non-profit institutional lending exist, commercial rental activities require careful attention to licensing requirements. This framework, particularly when contrasted with the general principles of the First Sale Doctrine in the U.S. (albeit with its own specific rental exceptions), highlights another area where understanding the nuances of Japanese copyright law is essential for compliant business operations.