Supreme Court of Japan Decision Clarifies Ability to Enforce Certain Foreign Judgments

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On April 24, 2014, the Supreme Court of Japan issued a decision (Decision) with respect to the 'enforcement of foreign judgments' by Japanese courts. The Decision sets out criteria for when a Japanese court must enforce an injunction that has been issued by a foreign court as a remedy to a tort claim.

In this Legal Insight we will explore the background of, and issues discussed in, the Decision.

Background

A California corporation (Appellant) and a Japanese corporation (Licensee) entered into a license agreement. The Appellant granted an exclusive license of certain intellectual property to the Licensee. The relevant intellectual property constitutes a 'trade secret' under California law.

Following disclosure of the intellectual property, some of the employees of the Licensee, who had gained knowledge of the Appellant’s intellectual property during their time at the Licensee, left the Licensee and formed a new company (Appellee Company) together with former employees (Appellees). The Appellant filed a lawsuit with the United States District Court for the Central District of California (California Court) against the Appellees, seeking: 

  1. damage compensation
  2. an injunction to prohibit unfair disclosure and misappropriation of the Appellant’s trade secrets in Japan and the United States, arguing that the Appellant’s trade secrets had been unfairly disclosed and misappropriated by the Appellees. The California Court ruled for the Appellant.

Following its victory in the California Court, the Appellant filed a motion to enforce the judgment with a Japanese court. However, the Tokyo High Court ruled against the Appellant, holding that the Appellant failed to provide enough evidence to prove there had been damages in the United States caused by the Appellees’ tortious acts in Japan. The Tokyo High Court ruled that the California Court, in this instance, did not have jurisdiction to: 

  1. rule on the tort action for damage compensation, nor
  2. grant the tort injunction, and that the foreign judgment could not be enforced in Japan.

Overview of Enforcement of Foreign Judgments in Japan

In order to enforce a foreign judgment in Japan, a party to a dispute must obtain an “enforcement judgment of a final judgment from a foreign court” (Enforcement Judgment) from a Japanese court pursuant to the Civil Execution Act of Japan. If obtained, the Enforcement Judgment will declare that Japanese courts should enforce the final judgment by a foreign court.

In order to obtain the Enforcement Judgment, all of the requirements for 'recognition of a foreign judgment' under the Code of Civil Procedures of Japan (Civil Procedure Code) must be met, including:

  • proper jurisdiction of the foreign court
  • proper service of process
  • not being contrary to public policy
  • that the foreign jurisdiction has substantially similar enforcement procedures as Japan. In this case, the proper jurisdiction of the foreign court was the main issue.

Issues and Decision

1. Jurisdiction over decisions made by foreign courts

The Supreme Court held that courts should follow its previously established framework for deciding issues of jurisdiction of foreign courts, specifically that jurisdiction should be determined by considering (i) the applicable jurisdictional provisions in the Civil Procedure Code and (ii) public policy.

2. Applicable jurisdictional provisions of Civil Procedure Code: definitions of 'tort claim' and 'place of the tort'

The Civil Procedure Code provides that a 'tort claim' is one of the categories a Japanese court may consider when it considers the jurisdiction of a foreign court in enforcing a foreign judgment. Previously, it was unclear whether a 'tort claim' would include a motion for injunction under the Civil Procedure Code. The Supreme Court concluded that, in general, a 'tort claim' includes a motion for an injunction by a person whose interests were infringed or threatened by a tortfeasor’s unlawful act. Further, the Supreme Court did not limit the definition of 'tort claim' to tort claims under the Civil Code of Japan.

Next, the Supreme Court discussed the definition of 'place of the tort', which is referred to when analyzing a court’s jurisdiction over tort claims. The Supreme Court concluded that the definition covered:

  • the place where an illegal act could be conducted
  • the place where the interest or the right could be infringed, reasoning that one can file a motion for injunction in tort even when a person’s interest is merely threatened, but not yet infringed.

3. Required elements in the 'place of the tort' analysis

The Supreme Court went on to rule on which elements were required for a plaintiff to fulfil with respect to the 'place of the tort' aspect of a tort action. The Supreme Court followed its existing interpretation in this regard and stated that a plaintiff is only required to prove either

  • that the defendant’s act in the foreign country where the judgment was issued (Foreign Country) infringed on the plaintiff’s interest or right in either the Foreign Country or Japan
    or
  • that the defendant’s act in the Foreign Country or Japan infringed on the plaintiff’s interest or right in the Foreign Country.

Next, the Supreme Court discussed what a plaintiff is required to prove with respect to 'place of the tort' when an injunction in tort has been issued in a Foreign Country. The Decision states that (i) the defendant does not have to have actually conducted a tortious act in the Foreign Country and (ii) the plaintiff’s interest does not have to have actually been infringed in the Foreign Country. Rather, “it is sufficient if the plaintiff can verify the objective fact that the defendant could conduct a tortious act in the Foreign Country or the plaintiff’s interest could be infringed in the Foreign Country”. In addition, the Supreme Court stated that Japanese courts could have jurisdiction to enforce the California Court’s decision on tort compensation.

Based on the foregoing, the Supreme Court rejected and remanded the decision made by the Tokyo High Court, stating that its decision denying the jurisdiction of a foreign court was made without having considered the above points, and did not comply with Japanese law.

Conclusion

This Decision helps to clarify how Japanese courts will rule on:

  • issues of a foreign court’s jurisdiction to issue tort injunctions that are enforceable in Japan
  • on the enforceability of a foreign court’s decisions issued with respect to tort claims.

Ultimately, the Decision clarifies and expands a plaintiff’s ability to enforce an injunction in Japan that it has obtained in a foreign jurisdiction.

 

 

Topics:  Foreign Judgments, Intellectual Property Litigation, License Agreements, Tort

Published In: Business Torts Updates, Civil Procedure Updates, Civil Remedies Updates, Intellectual Property Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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