## Facts

- Copyright holders owned rights in audiovisual works embodied in home console video game software.
- A company engaged in selling and otherwise transferring used copies of that game software to the public.
- The copyright holders sought an injunction and related relief, alleging that secondhand sales infringed their statutory right to control public distribution/transfer of copies.
- Lower courts rejected the claims, reasoning that the relevant distribution right in the copies was exhausted after the first lawful marketing of those copies.
- The copyright holders appealed to the Supreme Court of Japan (First Petty Bench).

## Issues

1. Whether the copyright holder’s distribution/transfer right in copies of an audiovisual (cinematographic) work embodied in home video game software remains enforceable against downstream secondhand resales.
2. Whether, and on what rationale, an exhaustion (first sale) principle limits the copyright holder’s control over subsequent transfers of particular lawfully sold copies.
3. Whether statutory provisions recognizing exhaustion for non-film works imply that cinematographic works are excluded from exhaustion.

## Decision

- The Supreme Court affirmed the lower courts and dismissed the copyright holders’ appeal.
- The Court held that, for copies of cinematographic works embodied in home video game software not intended for public presentation, the right to transfer/distribute those copies to the public is exhausted once the copies are lawfully sold.
- Because the right was exhausted as to the particular copies, resale of used home video game software to the public did not constitute copyright infringement.
- The Court rejected the argument that statutory exhaustion language for non-film works negated exhaustion for cinematographic works; the statutory provision was treated as confirmatory of a broader exhaustion principle.

## Legal Principles

- When a right holder (or an authorized party) lawfully places particular copies of a copyrighted work into commerce, the right to control downstream transfers of those copies is exhausted as to those copies.
- Copyright protection must be construed in balance with the public interest, including maintaining ordinary market circulation of goods.
- Commercial transactions in tangible copies typically proceed on the premise that a lawful purchaser acquires the ability to re-transfer the copy; requiring right-holder permission for each resale would impede ordinary distribution.
- The right holder has an adequate opportunity to obtain compensation at the initial sale or through licensing terms; continued control over resales of the same copy is not required to secure remuneration.
- A statutory exhaustion rule applicable to certain categories of works may reflect, rather than limit, a generally applicable exhaustion doctrine; non-inclusion of a category does not alone establish perpetual downstream control.

## Conclusion

The Supreme Court held that lawful first sale of home video game software copies exhausts the copyright holder’s distribution control over those particular copies, so secondhand resale to the public is not infringement, and injunctive relief was properly denied.


Copyright Holders v. Used Video Game Software Dealer, 56 Minshu 808 (Sup. Ct. Japan 2002)