9Desirable Form of Unfair Competition Prevention for the
Reinforcement of IP Protection

The Intellectual Property Policy Outline urges stronger protection of trade secrets under the Unfair Competition
Prevention Law, both in civil and criminal respects.
In order to address these challenges, this report analyzed ideal provisions for facilitating proof of the presence ofan act of infringement and the amount of damages in litigation under the Unfair Competition Prevention Law, andthe conceptual provisions appropriate for the present networked society.
In addition, the problems that would arise if criminal penalty provisions for strengthening protection of trade
secrets were established in the Unfair Competition Prevention Law and problems related to the protection of trade
secrets in litigation were studied.
An analysis was also made as to the trade secret management guidelines that would be helpful for companies toformulate strategic programs for improving their management of trade secrets.

Introduction
1

For the research and study on the Unfair
Competition Prevention Law in FY 2002, theCommittee on Research and Study on
Reinforcement of Civil Protection and Review of
the Conceptual Provisions, the Committee on
Research and Study on Adequate Protection ofTrade Secrets and the Committee on Researchand Study on Guidelines on the Management ofTrade Secrets in Business Entities were formed
to investigate the issues concerning reinforcing
the civil protection for the claimant, adaptation to
networking and criminal protection of trade
secrets.

Ⅰ Committee on Research andStudy on Reinforcement of Civil
Protection and Review of theConceptual Provisions
The Committee on Research and Study on
Reinforcement of Civil Protection and Review of
the Conceptual Provisions investigated thefollowing issues as the issues concerning
reinforcing civil protection for the claimant: cproviding for the obligation of presenting thespecific mode of infringement; d enhancing
document submission orders; and e introducing an
in camera procedure. The committee also studied
the following: f opinion from industry requesting
the reinforcement of civil protection of the claimant,
including the introduction of a provision for easierburden of proof of the amount of lost profit;
furthermore, as an issue pertaining to the measures
to cope with networking, it looked into g reviewing
the conceptual provisions of the Unfair Competition
Prevention Law to adapt to the IT era.

IIP Bulletin 2003

Stipulating for the obligation of presenting
specific modes

On the subject of stipulating for the obligationof presenting specific modes, while two different
opinions were presented for the reasons given
below, the introduction of such stipulation isrecommended because it can be expected that it
will help a judge to clarify issues and expedite court
proceedings.
The opinions presented in support of
introduction were as follows: c Among law suits on
the violation of business interest by an act of unfair
competition, especially in cases concerning trade
secrets, the manner of infringement by the
respondent is mostly very difficult to specify.
Therefore, there seems to be recognizable merit in
stipulating for the obligation of presenting specificmodes, which would help the claimant to assert andprove the infringement more easily; d Since theUnfair Competition Prevention Law can beconsidered as in the position of a general law among
intellectual property laws, from the viewpoint ofmaintaining balance with the other four industrial
property laws like the Patent Law, it is desirable tostipulate in the same manner as has been done insuch laws.
The reasons presented by those against
introduction were as follows: c In cases under the
Unfair Competition Prevention Law, except cases
involving trade secrets, generally, infringing
products will most likely be on the market, and theclaimant can easily ascertain the respondent’s
manner of infringement; therefore, there is no
substantial need for the stipulation; d Since theidentification of the specific modes of infringementby the defendant will generally be in the earlier partof court proceedings, there could be a danger of● 70 ●

such stipulation being abusively utilized mainly to
explore the trade secrets of the defendant; eBecause the obligation of presenting specific modes
could also be elicited from Section79(3) of the Ruleof Civil Procedure, additional stipulation would not
be necessary, and even if it were stipulated, itwould only be intended to be a confirming
provision.
2

Enhancing document submission orders

Since, in cases related to trade secrets,
infringing acts are mostly conducted within thepremises of the defendant and documents
concerning the infringing acts usually exist on theside of the defendant, it is difficult for the plaintiff toobtainthose
documents.
Therefore,
theamendment of the law to accommodate theenhancement of document submission orders
should be made in the same way as was done forthe four industrial property laws and the CopyrightLaw, since such provision for the obligation of
production of “documents necessary to prove an
infringing act” is to alleviate the plaintiff’s burdenof allegation and proof and to help to realize
appropriate and speedy proceedings.
On the other hand, an opinion was presented
that it would not be so meaningful to provide forsuch document submission order in the Unfair
Competition Prevention Law because Section 220of the Code of Civil Procedure provides for the
obligation of document production as one of thegeneral obligations.
Regarding “a legitimate reason” for refusing to
produce documents, “matters with regard totechnological or professional secrets” as provided
in Article 197 of the Code of Civil Procedure will be
regarded constituting “a legitimate reason” and be
exempted from the obligation for production of
documents. Therefore, an opinion was presented tothe effect that it is meaningful to provide for theenhancement of document submission as long as, inorder to decide on the existence of such legitimate
reason, not only judgment of whether the subject
matter is a trade secret or not, but also judgmentcomparing and weighing the need to protect thetrade secrets of the document holder and the needof the movant to prosecute the proceedings is
conducted. Specifically, conducting judgment on“legitimate reason” through in camera inspection isconsidered as a countermeasure.
3

Introduction of in camera procedure

In order to decide on the necessity of an orderto produce documents in a case concerning
infringement of business interest by an act of unfair
competition, the court often cannot decide whether
a “legitimate reason” exists without actuallyinspecting the relevant documents. However, if thecourt conducts the inspection in open court, theconfidential information contained in the documents
would leak to outside, causing serious damage tothe holder of the documents. Therefore, it isconsidered necessary to introduce in camera
procedure also in the Unfair Competition
Prevention Law.
The following points have been made withregard to in camera procedure: c there is a“concern about the guaranty of due process” in thatthe involvement of the related parties is notallowed; and d there is a concern about the “effecton the formation of impression” in that, while thisis a procedure for introduction of evidence, thejudge could form an impression about the merits.
However, in light of the current situation of caseproceedings and the purposes of the introduction ofthis procedure into the Code of Civil Procedure and
the Patent Law, etc., these points could beconsidered permissible.
4

Opinions from industry about reinforcing
civil protection for the plaintiff(1) Stipulating for the obligation of presenting
specific modes
Industry is not in a position to oppose to theintroduction of the stipulation because it
understands that, while, generally speaking,identifying the infringing act in the case of an act of
unfair competition under the Unfair Competition
Prevention Law is easy and the need for the
introduction of such stipulation is not very great, if
the stipulation is introduced, it will have a certain
practical merit in view of the expected speedup of
court proceedings and fairness for the parties.
Among improper acquisition, use anddisclosure of a trade secret (Section 2(1)(iv)-(ix) of
the Law), especially as for an act of “use,”“infringing” manner can be conceptualized in thesame way as in the case of infringement of a patent;
therefore, for the same purpose as in the case of
the introduction into the Patent Law, in view of the
expected speedup of proceedings and the fairness
for the parties, the introduction of the same system
as introduced into Patent Law is considered to havepractical merit. However, in a litigation on an
infringement of trade secrets, there is a possibility
that while the trade secret the plaintiff asserts topossess is yet to be adequately identified, thedefendant is required to present his specific mode,
and it is concerned that the relative scope of the
trade secret required to be disclosed by the
defendant might be greater than that of the plaintiff.
This may be not only imposing too much burden on
the defendant, but it could also have an adverse
effect by inducing misuses of the system such asentering an action for the purpose of exploring theother party’s trade secrets. Therefore, an
exempting provision applicable to cases where the● 71 ●IIP Bulletin 2003

presentation of specific modes includes trade
secrets is considered necessary.
(2) Expanding the scope of order for
submission of documents and accompanying
protection of the trade secrets of theperson submitting the documents
That the purpose of orders for submission of
documents may also include proof of infringementof trade secrets is supportable, because this would
assist fact finding in the lawsuit. In that case,however, it should be accompanied by stipulating
for a measure to effectively protect the trade
secrets. This is because, if the scope of document
submission order is expanded, it will cause thepossibility of trade secrets being disclosed to a third
party through the other party; and furthermore, if
the judge denies “legitimate reason” for documentsthat contain trade secrets and presentation of the
trade secrets is required at the examination ofevidence in the trial of the case, there isunavoidable risk, under the present legal system, of
the trade secrets becoming publicly known in open
court. Therefore, we consider it necessary to takeproper measures to protect secrecy so that theowner of a trade secret is not treated unfairly.
Specifically, a system like “Protective Order” in the
U.S. is considered indispensable, by which thosethat are allowed to access trade secrets may belimited to outside lawyers, etc. and penal
regulations may be applicable in cases of unfair
disclosure.
(3) Creating a provision for easier burden of
proof of lost profit
As in the case under the Patent Law, there
could be cases in which the plaintiff may not be
granted adequate amount of damages under theprovision of Section 5(1) and others of the current
Unfair Competition Prevention Law. Therefore, theintroduction of the same provision as Section
102(1) of the Patent Law should be considered
positively. However, the Unfair Competition
Prevention Law covers a variety of act-patterns andthere are cases for which the introduction of thesame provision as in the Patent Law is notnecessarily considered appropriate; therefore,
careful attention is necessary when considering the
introduction of such a provision. Specifically, apossible way, applicable to Section 2(1) (i) to (ix),(xiii) and (xv) of the Unfair Competition Prevention
Law, is to introduce the same provision as in the
Patent Law for easier burden of proof of lost profit(the calculation method of the amount of money
obtained by multiplying the amount of infringing
articles transferred by the defendant by the amountof unit profit of the plaintiff’s articles).

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5

Reviewing the conceptual provisions of
the Unfair Competition Prevention Law toadapt to the IT era

We investigated whether each concept of theterms “goods,” “use,” “sale” and “delivery” under
the Unfair Competition Prevention Law wasapplicable to intangible property transactions
conducted over the Internet such as computer
programs or others and discussed the pros and consof an amendment of the current law.
First, as for the concept of “goods,” it should
be interpreted to include intangible matter because,in this information-oriented society, intangible
property is also regarded as itself being the subject
matter of transactions as well as tangible property.
In addition, there is no definitional provision on theconcept of “goods” in the Unfair Competition
Prevention Law and whether a subject matter falls
within “goods” or not is to be examined from thestandpoint of establishing and maintaining the orderof fair transactions, the objective of the Law, andtherefore, there should be no need to differentiate
between tangible and intangible subject matters in
the interpretation of the law.
Second, as for the concept of “use,” since,
unlike the Trademark Law, the Unfair Competition
Prevention Law has no definitional provision on theterm “use” and therefore has no specificqualification on the manner of use, it is not required
to interpret “use” of an indication as limited to use
on tangible goods. In addition, the meaning of “use”
under the Unfair Competition Prevention Law has
been interpreted loosely in judicial precedents andtheories; recently, there was a decision thatsquarely recognized that the use of goods or otherindications on the Internet falls within “use” under
the Unfair Competition Prevention Law. Therefore,
it is submitted that there is no need for anamendment of the law in this regard.
Furthermore, as for the concept of the terms“sale” and “delivery,” the amendments of the
Patent Law and the Trademark Law in 2002 added,
as a manner of “implementation” of patent right or“use” of trademark right, “the act of providing(intangible items) through electric communicationlines.” This was to make it clear that, assuming that“product” in the Patent Law and “goods” in theTrademark Law include intangible items such as
computer programs, transmitting intangible items
such as computer programs via networks shall becovered by the right on such items. On the other
hand, whether the concept of “sale” or “delivery”
in the Unfair Competition Prevention Law includes
the act of providing intangible products through anelectric communication line is not clear from thelanguage of the statute. Therefore, we consider it
necessary to make it clear that the concept of“sale” or “delivery” in the Unfair Competition
Prevention Law includes the act of providing● 72 ●

intangible
products
throughanelectric
communication line in the same way as the cases of
the Patent Law and the Trademark Law asamended in 2002.
6

Report of the Unfair Competition
Prevention Subcommittee of Intellectual
Property Policy Committee, Industrial
Structure Council

Based on the discussion of this Committee(Committee on Research and Study on
Reinforcement of Civil Protection and Review of
the Conceptual Provisions) and the Committee on
Research and Study on Adequate Protection ofTrade Secrets in II. below, the Unfair Competition
Prevention Subcommittee of the Intellectual
Property Policy Committee, Industrial Structure
Council investigated, from June 2002 to February
2003, possibilities of c reinforcement of civil
protection, d criminal protection of trade secrets,e adaptation to the progress of network, and f
trade secret protection in the process of a lawsuit,and made a report titled Direction of the Review of
the Unfair Competition Prevention Law.

Ⅱ Committee on Research andStudy on Adequate Protection ofTrade Secrets
The Committee on Research and Study on the
Adequate Protection of Trade Secrets looked into
the issues relating to the introduction of criminal
penalty for the reinforcement of protection of trade
secrets. Specifically, for the criminal regulations in
the case of unfair disclosure and use of trade
secrets under the Unfair Competition Prevention
Law, the committee studied the following items: cfeasibility of Subsection 2 crime; d level of penalty;
e concurrence of crimes (number of crimes); fcrime committed outside Japan/extraterritorial
application of Criminal Code; g attempt; hcomplicity; i case of larceny committed against
relatives; j limitation to public action. In addition,k issues on criminal procedure for adequate
protection of trade secrets in the course ofproceeding were also investigated, and overseas
research was conducted on l the provisions forcriminal penalties related to the protection of trade
secrets in major countries.
1

Feasibility of Subsection 2 crime

In the past, no criminal penalty provision has
existed to protect information as such as property,
while court decisions have recognized the
proprietary value of information as incorporated in
an item of “matter.” However, all of these court
decisions referred to the value of information as

incorporated in the “tangible property” that is the
subject matter and did not discuss the proprietaryinterest in information separately from the tangible
matter. The interest that conventional property
crime has aimed to protect has the nature of “beingtransferable” from the victim to the perpetrator. On
the other hand, trade secrets, being information, arecharacterized as “non-transferable” because “theyremain even if taken.” For trade secrets, with thecharacteristics
of“non-transferability”
ofinformation, it is hard to recognize a transfer of any
specific interest, and, even if it is such a piece of
information that compensation can be considered
for it, the acquisition or disclosure of a trade secretas such would not lead directly to actual damage;therefore, the scope of possible coverage of an
infringement of trade secrets by conventional
subsection 2 crime, subsection 2 fraud (of Section
246(2) Criminal Code), and subsection 2 extortion(Section 259(2), Criminal Code) is limited.
2

Level of criminal penalties

Although statutory penalties for conventional
type crime are stipulated at a high level for
property crime, as for the crime of infringing
intellectual property rights, they are stipulated at alower level. For example, while larceny or fraudusing computers, an unfair acquisition type ofoffence, shall be penalized by imprisonment withlabor not exceeding 10 years, infringement of apatent right or a trademark right shall be penalized
by imprisonment with labor not exceeding five
years or a fine not exceeding five million yen.
3

Concurrence of crimes (multiple crimes)

When we consider applying a new provision
for infringement of trade secrets to an act
comprising a conventional property crime, since the
new legislation is not intended to weaken theprotection so far provided, the property crime andthe infringement of trade secrets would constitutean crimes to be charged as a single crime. However,if the interest protected by the Law is to maintainorderly competition, the substantive law should
recognize the relation of the multiple crimes overproperty crime and infringement of trade secrets.
Unfair acquisition and use of information, eachof which may constitute infringement of thecompetitive order but are acts that are related interms of purpose and means, may be regarded asliable to be treated as a single infringement, and areconsidered to constitute connected crimes.
In the case of infringing a trade secret byacquiring information by theft and then unfairly
competing using the information, there are pluralacts offending plural interests protected by law, as
well as a plurality of illegality and liability, andtherefore these acts constitute a combined crime.

● 73 ●IIP Bulletin 2003

4

Crime
committed
outsideJapan/
extraterritorial application of Criminal
Code

In Japan, the cases where a person committing
a crime outside of Japan is punishable underJapanese law are limited to cases of major offenses
against national or social interests protected by law,and the scope of extraterritorial application of the
Criminal Code is quite restricted. Judging fromthe perspective of comparative law, Japan can besaid to have been generally conservative as to thepunishment of crime committed outside of Japan,
and, attaching importance to maintaining a balancewith other crimes in the past, we consider itdifficult to provide for the punishment of crimecommitted outside of Japan when we newly
legislate for the crime of trade secret infringement.
However, it should be noted that the international
trend today is toward expanding punishment ofcrimes committed outside national territories, at atime when the movement of people and goods has
become so liberalized and accelerated.
5

Attempt

For any of the crime patterns of Section
2(1)(iv), (v), (vii) and (viii) of the Unfair
Competition Prevention Law, no provisions forpunishment of attempt should be made. Thisconclusion is supported also from the standpoint ofconsistency with other laws. At present, no crime
pattern with its interest protected by law asintangible property, such as Section 196 of Patent
Law or Section 78 of Trademark Law, for example,
has a provision for punishment of attempt. As longas even these crimes whose interests protected bylaw are intangible products that are made open andwith clear scope of right do not have provisions forpunishment of attempt, it would seem to lose thebalance of the scope of punishment to makeprovisions for punishment of attempt of a crime
whose interest protected by law is a trade secretthat lacks such systematic back up.
6Complicity

As for complicity, because of the generalregulations in the Criminal Code, without a new
regulation for its punishment, an act of involvement
within the scope of Criminal Code’s coverage shallbe punishable. However, it is questionable whether
the patterns of item paragraphs (v) and (viii) in
Section 2(1) of Unfair Competition Prevention Law,
which are acts similar to those actually constituting
complicity with the patterns of paragraph (iv) or(vii) , are also to be punished as principal offences.
In conclusion, we consider that no regulation forpunishment of the patterns of paragraphs (v) and(viii) should be made. This is because making

IIP Bulletin 2003

regulations for punishment of the patterns ofparagraphs (v) and (viii) would problematically
expand the scope of punishment while the merit ofmaking such regulations does not seem to be so
substantial.
7

Case ofrelatives

larceny

committed

againstFor most of the property crimes provided in
the Criminal Code—specifically, theft, wrongfully
taking possession of immovable property, computer
fraud, breach of trust, extortion, embezzlement(including, in the conduct of business) andmisappropriation of lost property—, special
provisions are made for cases where crimes arecommitted against relatives. For these crimes, if
committed against a “spouse, lineal relation or
family member in the same household,” they shallbe necessarily exempted, and if committed against
another family member, they shall be indictable
upon complaint.
The exceptional treatment for crimes among
relatives is applicable only when there is kinship, inthe case of the pattern of Section 2(1)(vii) of the
Unfair Competition Prevention Law, between theperpetrator and the business entity holding thetrade secret, and in the case of the pattern ofparagraph(iv), also between the perpetrator and theperson in charge of the trade secret. However,business entities holding trade secrets are mostly
legal persons, with which there cannot be any
kinship; therefore, the exceptional treatment for acrime among relatives is not scarcely applicable toan infringement of trade secrets.
8

Limitation to public action

The period of limitation for public action
provided in the Code of Criminal Procedure isstipulated to be determined automaticallydepending on the scope of the statutory penalty.
There is no stipulation that exceptionally reduces
or extends this statutory limitation period either in
the Criminal Code or in any other laws. Therefore,
we consider that, for the crime of trade secretinfringement, such exceptional provision should not
be sought, and the provision for the period oflimitation in the Code of Criminal Procedure should
be applied.
9

Issues on criminal procedure

Section 82 of the Constitution stipulates theprinciple of open trial except in cases where
publicity is dangerous to public order or morals.
Under this condition, if an act of infringing a
trade secret is stipulated as a crime, a possibility
arises that the trade secret itself that the law isgoing to protect by criminal penalty be further● 74 ●

damaged by being made public in the criminal
proceedings. The question is, while avoiding thisproblem, whether we can work out an appropriate
system that will seek reasonable coordination withthe principle of open trial.
One way considered to coordinate therequirement of trade secret protection for the
future and the issue of “publicity” accompanying
the process of trial, may be, without a major reformof the current criminal judicial system, to stipulate
the crime of trade secret infringement as indictable
upon complaint. This is a way in which the very
exercise of the right of prosecution of the state ismade dependent on the injured party, by making
prosecution subject to the will (whether a complaintis brought or not) of the owner of the trade secret,and the ultimate decision lies with the injured party
himself and not the state, based on comparative
consideration of the interests of foreseeable
possibility of additional disclosure of trade secrets
coming from the open trial, or in other words thedegree of exposure and accompanying damage,versus the need of criminal penalty upon theoffender, or prevention of a second offence, andsentiment about the punishment.
The Committee’s report also discussed theissues pertaining to “the right to make a complaint”
in the case of making the crime of trade secretinfringement indictable upon a complaint, and theexceptions to the principle of open trial.

The Committee on Research and Study on
Guidelines on the Management of Trade Secrets in
Business Entities discussed fundamentals fordrawing up such guidelines. Based on thediscussion in this committee, the guideline waspublished by Ministry of Economy, Trade andIndustry on January 30, 2003.
(Senior Researcher: Nobuo Kawasaki)

10 Overseas research
For reference in the legislation in Japan
introducing criminal penalty for better protection of
trade secrets, research was conducted on theprovisions for criminal penalties related to theprotection of trade secrets in major countries.
Specifically, for the U.S.A., Germany, the U.K.,
France, Italy, Canada, Korea and China, research
was conducted in the following areas: c thelegislative reason for each provision of criminal
penalty to protect trade secrets; d the actual
manner of operation of each provision of criminal
penalty to protect trade secrets; and e evaluationof the current situation and problems of eachprovision of criminal penalty to protect trade
secrets. The results of the research are included in
the Committee’s report.

Ⅲ Committee on Research andStudy on Guidelines on theManagement of Trade Secrets in
Business Entities
The Intellectual Property Policy Outline
suggested that guidelines for reference be drawn up
so that companies can make up strategic programsfor strengthening management of trade secrets.
● 75 ●IIP Bulletin 2003