9Research and Study on Reinforcement of Protection ofIntellectual Property Based on the Unfair Competition
Prevention Law (Protection of Trade Secrets and Measures
Against Counterfeit Goods and Pirated Copies)

In this study, the necessary direction for amendment of the Unfair Competition Prevention Law wasindicated in order to reinforce protection of intellectual property under the law in response to such a request in
the Intellectual Property Strategic Program 2004. In this process, examination was made on the following points
with regard to leakage of trade secrets that are managed in Japan, for the purpose of preventing outflow ofknow-how and technology of Japanese industry to other countries: (1) misuse/disclosure overseas; (2) malicious
misuse/disclosure by a former employee; (3) a secondary participant concerned with a malicious offender; (4)introduction of criminal penalties against the corporation (offending corporation) to which a malicious offender
belongs; and (5) the raising of penalty levels. In addition, study was made on the following points for the purposeof preventing inflow of counterfeit goods and pirated copies to Japan: (1) clarification of the definition provisionof Article 2(1)(iii) of the Unfair Competition Prevention Law; (2) introduction of criminal penalties to Article
2(1)(ii) and (iii); and (3) application of border control measures (Customs Tariff Law) to goods that infringe theUnfair Competition Prevention Law.

In the study on reinforcement of protectionof intellectual property based on the Unfair
Competition Prevention Law (protection of trade
secrets and measures against counterfeit goods
and pirated copies) in fiscal 2004, industrial andsocial demands regarding the Unfair Competition
Prevention Law were studied concretely andextensively, and the possibility for protection
based on the Unfair Competition Prevention Law
was examined. In conducting the study, thefollowing committees were established based on
the requests indicated in the Intellectual Property
Strategic Program 2004: (i) a Study Committee on
Ideal Ways to Protect Trade Secrets wasestablished to study reinforcement of protection
against leakage of trade secrets; and (ii) a Study
Committee on Measures for Anti-counterfeit
Goods, etc. Based on the Unfair Competition
Prevention Law was established to verify theregulations on acts of preventing imitation of theconfiguration of goods, which has been in force
for ten years, and reinforcement of border control
measures and criminal penalties against
counterfeit goods and pirated copies fromoverseas.

I

Study Committee on Ideal Ways
to Protect Trade Secrets

This study committee analyzed the criminal
protection against leakage of trade secrets, which
was introduced with the 2003 amendment of the
Unfair Competition Prevention Law whileconsidering the current status of the Japaneseindustry, demands from the industrial world, theactual situation of damage, the relationship withIIP Bulletin 2005

other Japanese laws and regulations, and thecomparison with overseas legal systems.
Specifically, concrete examination was made on
the following: (1) handling of trade secrets incriminal proceedings (possibility of introducing
closed trial proceedings); (2) misuse/disclosure of
trade secrets overseas; (3) misuse/disclosure of
trade secrets by a former employee; (4) violationof trade secrets by secondary participants; (5)introduction of penalties on corporations based ondual liability; and (6) review of the penalty levels
for violation of a trade secret.
1

Handling of trade secrets in criminal
proceedings

The Law Partially Amending the Court
Organization Law, etc. in 2004 enhanced
protection of trade secrets in civil litigation by
establishing requirements and procedures formaking the closed trial proceedings in civil
litigation involving trade secrets and introducing
a protective order.
Based on this, the study committee
examined the possibility of introducing a measure
for making the closed trial proceedings, which isadopted for civil litigation, in criminal
proceedings also. The biggest issue was therelationship with the Constitution of Japan.
In the relationship with the principle to makeopen trials under Article 82 of the Constitution,
the point of dispute was whether or notdisclosure of a trade secret was “dangerous to
public order or morals” as under Article 82(2) of
the Constitution. There was an opinion that thedisclosure may contravene “public order” when

● 64 ●

damage similar to the offense in question could
occur as a result of the disclosure, because theinterests protected by law against violation of
trade secrets include “fair competition order.”Nevertheless, there was also an opinion that“public order” is interpreted as “a case where
public safety is threatened, such as directly
persuading the public to commit rioting or otheroffenses, that being the same meaning as law andorder referred to in Article 59 of the Meiji
Constitution,” so it would be an excessively broadinterpretation to include the overall protection of
trade secrets.
Next, the differences in the theoreticalstructure of provisions on civil proceedings andcriminal proceedings were pointed out. With
regard to civil proceedings, the trials are closed
when a compromise is sought between theprinciple of making trials public under Article 82of the Constitution and the right of access tocourts under Article 32 of the Constitution, so as
not to make the right of access to courts
meaningless. On the other hand, as for criminal
proceedings, the proviso to Article 82(2) of theConstitution stipulates the grounds for always
making the proceedings related to criminal cases
public, and the accused has the right to a public
trial under Article 37(1) of the Constitution, as
opposed to the case of civil proceedings. In
addition, in criminal proceedings, the owner of
the trade secret, who is the injured party, is notparty to the trial, so while the injured party could
enjoy the interest of the right of access to courts
as the plaintiff in civil proceedings, he/she is not
likely to enjoy such an interest in criminal
proceedings.
2

Misuse / disclosure of trade secrets
overseas

The interests protected by law with regard to
trade secrets are the “property value of trade
secrets” and “fair competition order,” and“property value” will be lost all the same whether
a trademark secret is misused or disclosed inJapan or if it is misused or disclosed overseas. It
is hoped that measures will be taken against theoutflow of intellectual property across national
borders in order to deal with the increase in thenumber of intellectual property-related disputes
inside and outside of Japan pertaining to
globalization. Furthermore, the legal systems ofother countries (the United States, Germany,
France, the Republic of Korea, and China) are all
found to punish overseas leakage of trade secrets
that are protected within the country. Therefore,
it is a minimum requirement for Japan to adopt
the same standard as overseas legal systems inorder to maintain the competitiveness of theJapanese industry.

As a result of the discussions, the study
committee found it desirable to apply criminal
protection when an object to which Japanese law
applies—that is, the trade secret that was
managed within Japan when an act of violating themanagement controls occurred in the case of
unlawful acquisition and when the trade secret
was indicated in the case of lawful acquisition—isused or disclosed outside Japan.
3

Misuse / disclosure of trade secrets by aformer employee

Under
the
current
legal
system,misuse/disclosure of a trade secret by a former
employee is excluded from criminal punishment if
the former employee has not reproduced or taken
away a medium, etc. However, as many as 50 out
of about 80 cases on leakage of trade secrets
involved a former employee, though they are civil
proceedings. There are also malicious cases inwhich a person promises another company todisclose trade secrets while working for acompany, and then discloses those secrets after
leaving the company.
Therefore, the study committee settled on atentative direction to punish a former employee
only if he/she has breached a confidentiality
agreement that has been concluded under
freedom of contract between the company and theformer employee, considering the relationshipwith the freedom to choose and change one’s
occupation under Article 22(1) of the Constitution.
However, some problems were indicated, such as:
it may be difficult in effect to conclude anagreement between the company and the former
employee on equal terms despite the principle offreedom of contract; what kind of agreement
concluded at what time should be regarded as thebasis; and what should be the treatment for
employees who refuse to conclude theagreement.
As a result, it was decided that the criminal
penalties for breaching a confidentiality
agreement will be studied in future by giving
consideration to the establishment of practices
concerning confidentiality agreements and otherfactors. Meanwhile, the study committee
concluded that it would be appropriate to punish
malicious cases in which an employee promises toleak a trade secret or unlawfully acquires a trade
secret by solicitation before quitting, and uses ordiscloses the trade secret after quitting their job,even under the right of freedom to choose one’s
occupation.
4● 65 ●

Violation of trade secrets by secondary
participants
Under the current law, a secondary participant

IIP Bulletin 2005

is punished only if he/she is an accomplice of theperson who makes an unlawful disclosure. For
this point, in the committee, it was discussed
whether or not to make the secondary participanta principal offender, and as a result, it was decided
that the secondary participant should be made aprincipal offender.
Then, the study committee examined the act
subject to making the secondary participant a
principal offender. There were two options: (1) tomake an act of “acquiring” a trade secret from an
unlawful discloser subject to a penalty; and (2) tomake an act of “using or disclosing” the trade
secret acquired from the unlawful discloser
subject to penalty. In consideration of consistency
with Article 14(1)(iii) of the Unfair Competition
Prevention Law, which makes all acts of “using or
disclosing” a trade secret “acquired” through actsthat correspond to offenses—such as fraud or
violation of management controls—subject topenalties, the study committee found it more
appropriate to adopt (2).
With regard to the handling of tertiary andquaternary participants, the study committee
decided that it would be appropriate not toestablish special provisions for those who
acquired the information from the secondary
participant, and that the accomplice theory should
be applied instead, because they have a low levelof recognition that the “acquired” information is atrade secret.
5Introduction of penalties on corporations
based on dual liability

Penalties on corporations have not been
introduced for violation of trade secrets for the
purposes of (i) protecting the trade secret owner,(ii) protecting the person who changed jobs, and(iii) protecting the clients.
However, violation of trade secrets, which
involves “the purpose of unfair competition,”premisescompetition
betweenbusiness
operators. Therefore, penalties on corporations
are usually adopted in some other countries. In
addition, penalties on corporations are introduced
as a rule in intellectual property laws including
the Patent Law and the Copyright Law.
Introduction of penalties on corporations could
make companies reluctant to hire people who areswitching jobs and could hinder the mobility of
employment. Nevertheless, because violation of
trade secrets is by nature assumed to be
conducted as an organization for corporate
interests rather than for an individual’s interests,
and corporations often seem to fail to perform theduty of care in selecting and supervising
employees in such cases, penalties on
corporations must be introduced in order tosecure a deterrent effect against acts of violation.

IIP Bulletin 2005

Based on these points, the study committee
settled on introducing penalties on corporations
also for violation of trade secrets whileconsidering protection of the three parties above.
Next, acts to be subject to penalties on
corporations were examined. As a result, thestudy committee considered it appropriate toapply the penalties only to “acts committed by aparty unauthorized to access” (current Article
14(1)(iii); current Article 14(2)(iv); involving asecondary participant), which are considered tobe particularly malicious.
In addition, it was concluded that, in the casewhere a director or an employee (unauthorized toaccess) of a corporation that owns a trade secretviolates the trade secret by unlawful acquisition,
the corporation will become the injured party, so
the principle of not punishing the injured party
will apply, and there will be no need to establish
special provisions for such a case.
The study committee decided it was
reasonable to expect the government to consider
establishment of guidelines and standards
concerning the content of the duty of care inselecting and supervising employees.
6

Review of the penalty
violation of a trade secretlevelsfor

The current penalty on violation of a trade
secret is imprisonment of up to three years or afine of up to three million yen. On the other hand,according to the questionnaire survey conductedon the industrial sector, more than 70 percent of
the respondents agreed with raising the penalty
levels to the same level as that of otherintellectual property right laws such as the Patent
Law and the Copyright Law (imprisonment of up
to five years or a fine of up to five million yen; afine of up to 150 million yen for a corporation;
concurrent imposition of imprisonment and a finein the case of the Copyright Law) or to the samelevel as that for theft, etc. under the Penal Code(imprisonment of up to ten years).
In light of the fact that trade secrets areprotected from the creation phase without
registration, the study committee decided on theneed to raise the levels to the same level as thatof the Copyright Law, which provides protectionof a similar nature.
Furthermore, considering that the subjective
element of violation of a trade secret is “thepurpose of unfair competition,” and that theoffense is committed for gaining a competitiveedge or gain, it would effectively emphasize theimpression of the criminal penalty to impose afine and deprive the offender of a reasonableamount of money irrespective of whether
imprisonment is imposed. Therefore, the study
committee concluded that an introduction of● 66 ●

concurrent imposition of penalties would also benecessary.

Ⅱ Study Committee on Measures
for Anti-counterfeit Goods, etc.
Based on the Unfair Competition
Prevention Law
With an increase in the inflow of counterfeit
goods and pirated copies from neighboring Asian
countries to Japan in recent years, various
problems are occurring including the tarnishing ofcorporate brands’ credibility and reliability,
damage of consumers who are misled to believethat counterfeit goods are genuine goods,
counterfeit goods serving as financial sources forantisocial forces, and the advancement ofcounterfeit techniques. In order to address these
problems, the study committee examined thepossibility of amending the Unfair Competition
Prevention Law by conducting the following toclarify the content of protection against
counterfeit goods and pirated copies under thelaw: (1) verification of Article 2(1)(ii) ten years
after introduction; (2) verification of Article
1(3)(iii) ten years after introduction; (3)examination on introducing criminal penalties to
Article 2(1)(ii); (4) examination on introducing
criminal penalties to Article 2(1)(iii); (5)examination on introducing border control
measures for goods in violation of the Unfair
Competition Prevention Law; (6) examination of
measures against new modes of copying such asdead copy of databases or typefaces, etc.; (7)examination of industrial sector demands
concerning the Unfair Competition Prevention
Law and the legal system for protecting theconfiguration of goods.
1

Verification of Article 2(1)(ii) ten years
after introduction

The provision under Article 2(1)(ii), which isintended for protecting the indication of eminent
goods in goods or services fields where thetrademark for the eminent goods is not registered,is important as a measure against counterfeit
brand goods.
When the court decisions during the ten
years from the introduction were verified, there
were many cases where the plaintiff selectively
claimed application of Article 2(1)(i) and (ii), andwhen the court cannot find the goods to beeminent after examination, the court considers
application of Article 2(1)(i) by judging whether
the goods are well-known. Therefore, although
Article 2(1)(i) and (ii) differ in terms of the
purpose of legislation, continuity was observed intheir application.
The study committee considered it desirable

to continue studying the future direction of thesystem with regard to Article 2(1)(ii) including its
relationship with the defensive mark system.
2

Verification of Article 2(1)(iii) ten years
after introduction

According to the reference material of theIndustrial Structure Council at the time oflegislation, the purpose of legislation of Article
2(1)(iii) is to regulate free-riding on achievements
made by other peoples’ investments, and toprotect the interests of preceding persons.
However, its basis differs among people, and thisaffects the discussions on how this provision
should be stipulated.
The study committee made concrete
examination including verification of court
decisions particularly concerning the following
points, and summed up the future directions forthe respective issues.
(1) With regard to the scope of the right holder,“a person who needs to block unfair competition
conducted by copying and to maintain thepreceding party’s monopoly of the configurationof goods in order to protect one’s own profits, andwho has a strong interest in the monopoly of theconfiguration of goods” is construed as qualifying
as a plaintiff as mentioned in the court decision in
the Nu-Bra case.
(2) With regard to extension of the term ofprotection, some people support the idea toextend the term from three years to about five
years in practice, but because the design system
is currently under review for reform, many
people viewed that it would be appropriate to takemeasures based on the reformed design system.
(3) With regard to clarification of the time fromwhich the protection starts, many people opinedthat the problem is whether or not “businessinterests” were infringed, and there is no need forsuch clarification in particular.
(4) With regard to the meaning of “the dateselling thereof first commenced,” it will bereasonable to clarify that this date means the dateon which the goods were first sold in Japan,
considering the time of entrance into Japan andthe ease of proof at the time of litigation.
(5) With regard to the meaning of “theconfiguration of goods,” the majority agreed that
protection can be extended to the part of theinternal configuration of the goods, which isrecognizable for consumers in ordinary use, but aconsistent view could not be achieved on
clarifying the meaning by stipulating a definition
provision of “the configuration of goods.”(6) With regard to the meaning of “a configuration
which is commonly used for goods,” the phrase
analytically means “a commonplace configuration”
or “a shape indispensable for securing the● 67 ●IIP Bulletin 2005

function of the goods,” so it is desirable toconsider clarification of the meaning based on thispoint.
(7) With regard to the meaning of “imitated,”
the purpose of this provision at the time oflegislation was to protect “dead copies,” while
there is an established interpretation in court
decisions that imitation is to make an “identical orpractically identical” configuration by “copying
the configuration of another person’s goods,” it isdesirable to clearly indicate this interpretation asa definition provision and to increase theforeseeability.

Thus, due to the importance of clarifying theconstituent elements in introducing a criminal
penalty provision in Article 2(1)(iii), the study
committee decided that it is desirable to clarify
the constituent elements by clarifying thedefinition provision as explained in 2 above andother measures, as well as stipulate “the purposeof gaining illicit interests” as the subjective
element for regulating only persons who intend tomisuse another person’s prior investment or
intellectual work and make illicit interests byselling goods that imitate the configuration of theother person’s goods.

35Introducing criminal penalties to Article
2(1)(ii)

In the study committee, there was also an
opinion to exercise caution in introducing
criminal penalties, but it was decided thatcriminal penalties should be introduced only forparticularly malicious acts considering thecurrent situation of counterfeit damages.
Specifically, the study committee concluded
that criminal penalties should be introduced only
when the act under Article 2(1)(ii) is conducted“for the purpose of gaining illicit interests byusing another person’s credibility or reputation”
or “for the purpose of tarnishing another person’s
credibility or reputation,” in light of thelegislative purpose of Article 2(1)(ii).
4Introducing criminal penalties to Article
2(1)(iii)

Provisions on dead copies of theconfiguration of goods were introduced with the1993 amendment of the Unfair Competition
Prevention Law, but in recent years, the technicalmeans for copying are becoming more advanced,
and the methods for distributing counterfeit
goods are becoming more malicious, such as
removing the original marks. In addition,
considering that distribution of counterfeit goods
is becoming globalized and that trading ofcounterfeit goods is serving as the financial
source for antisocial forces, there are limits todealing with these counterfeit goods by civil
protection, and it has become inevitable tointroduce criminal measures and expect police todemonstrate their investigative and executive
abilities. Furthermore, while this provision iscomplementary to the Design Law in that it
protects industrial designs, criminal penalties are
already stipulated for acts of infringing design
rights, so it is also necessary to introduce
criminal penalties to acts of copying theconfiguration of goods in order to make theprovision complement the Design Law in acomplete manner.

IIP Bulletin 2005

Introducing border control measures forgoods in violation of the Unfair
Competition Prevention Law

Whiledesign-infringing
goods
and
trademark-infringing goods are subject to bordercontrol measures based on the Customs Tariff
Law, goods that constitute an act of unfair
competition are not subject to the border control
measures even if they are extremely similarcases. Nevertheless, the damage from inflow ofcounterfeit goods and pirated copies to Japan isincreasing in line with the advancement ofcounterfeit techniques and globalization ofcounterfeit goods distribution, and it is desirable
to make goods that constitute an act of unfair
competition also subject to border control
measures in order to enhance the effectiveness ofthe measures. However, as border control
measures at customs have a large impact on thebusiness of the person whose goods are stopped
at the border, the system must be designed bygiving consideration to compliance withinternational rules and protection of due processof law.
Thus, the study committee decided that it isdesirable to add goods that constitute an act of
unfair competition to import-prohibited goods
under Article 21 of the Customs Tariff Law, and inorder to make its operation more effective, makethose goods also subject to the system to request
a suspension of import (Article 21bis of the
Customs Tariff Law), based on a premise that theregulated acts are clarified by limiting theconstituent elements for criminal protection as
explained in 3 and 4 above.
6

Dead copy of databases

The Unfair Competition Prevention Law
does not have special provisions concerning
protection of databases, and databases, which do
not involve creativity, are not protected under the
Copyright Law either. However, creation andupdating of databases sometimes requires anenormous amount of investment. Thus, there is● 68 ●

an indication that lack of legal protection would
reduce incentives for database creators and
impede economic activities. A legal system toprotect databases has been established in the EU
and the Republic of Korea in recent years, so
continuous study must be made on the mostdesirable legal system for protecting databases inJapan, based on these overseas legal systems.
7

Possibility of applying the Unfair
Competition Prevention Law to newmodes of copying

It was indicated that discussions should bemade in the future about introducing a generalprovision on new modes of copying, such as actsof copying the logic circuit of a semiconductor
integrated circuit, or adding these modes to theacts of unfair competition, or taking bothmeasures, after making a comparative study of
the Copyright Law, the Law Concerning the
Circuit Layout of Semiconductor Integrated
Circuits, and overseas legal systems.
8

and its positioning in the overall industrial design
protection strategy, proposals were made on theactual examples of strategic utilization incompanies, expectations for the Design Law, andthe possibility of utilizing the Unfair Competition
Prevention Law that complements the Design
Law under the viewpoints of: (1) current situationof design protection in companies; (2) relationshipbetween intellectual property laws and value ofcommercial products; (3) comparison between the
Design Law and the Unfair Competition
Prevention Law; and (4) strategic utilization of
Article 2(1)(iii) and its positioning in industrial
design protection strategy.
(Senior Researcher: Isao Hyugaji)

Industrial Sector demands concerning
the Unfair Competition Prevention Law

Extensive opinions and demands were
presented on desirable protection under the
Unfair Competition Prevention Law against
counterfeit goods and pirated copies in light of
the actual situation of damage with thecooperation of various quarters of industry, as thebasis for the discussions at the study committee
and as future challenges concerning the Unfair
Competition Prevention Law. Thus, these
opinions and demands are introduced.
9

Protection of industrial designs under
Article 2(1)(iii) of the Unfair Competition
Prevention Law

With regard to the possibilities andlimitations of protection of industrial designs
under Article 2(1)(iii), concrete examination wasmade on the actual status of creation andprotection of industrial designs and therelationship with the Copyright Law and the
Design Law under the viewpoints of: (1) current
situation of industrial designs; (2) relationshipbetween industrial designs and Article 2(1)(iii) of
the Unfair Competition Prevention Law; (3)considerations of protection of industrial designs;
and (4) improvement of the system for protecting
industrial design rights. Based on thisexamination, proposals were made on the way inwhich industrial designs should be protectedunder Article 2(1)(iii).
In addition, with regard to the possibilities ofstrategically using Article 2(1)(iii) for companies● 69 ●IIP Bulletin 2005