Protection of Trade Secretin Japan
Tatsubumi SatoJudge, Intellectual Property High Court of Japan
September 2006

History of trade secret protection
1934 Enactment of Unfair Competition Prevention
Law
No provision regarding trade secret. Tradesecret had been protected by general laws.
1990 Addition of trade secret provisions (civil)¾ Increased mobility in labor market¾ Growing importance of trade secret forbusiness¾ Multi-lateral trade negotiations

History of trade secret protection(continued)
2003 Addition of criminal sanction provisions
2004 Addition of provision regarding proceduralprotection (order to keep confidentiality, closedtrial session)2005 Reinforcement of criminal sanction

Overview
1. Civil protection
1-1 infringement of trade secret- Unfair Competition Prevention Law- Civil Code (Art. 709)
- Commercial Code1-2 Contract- Civil CodeOverview (continued)
1-3 Procedural protection- Unfair Competition Prevention Law
2. Criminal Sanction- Unfair Competition Prevention Law- Criminal Code

General trends¾Cases regarding trade secret has been
increasing¾Both infringement and breach of contract
are claimed in most cases¾Often involves resigned employees¾Need consider freedom to choose
occupation (Constitution Art. 22)¾Small number of criminal cases

1-1 Infringement of trade secretDefinition of “Trade Secret”
1. Art.2 para.4
the term “trade secret” shall mean technical or
business information useful in commercial
activities, such as manufacturing or marketing
methods, which is kept secret and not publicly
known.
2. Three requirements¾ to be kept secret¾ information useful for business¾ not publicly known

“to be kept secret”
1.
¾

¾

2.
¾
¾

“to be kept secret”
Restriction on access to the information- kept in locked cabinets, designated persons,controlled by password,
Recognizable as secret from the appearance of thedocuments etc.
- indication of confidentiality
Case-by-case decision by judges
Most frequently disputed requirement
Weigh all related factors, but not easy to decide“information useful for business”
1. Examples
technical data, manufacturing methods,recipe, customers information, manuals
2. Includes negative information
failed test/experiment data
3. Excludes information regarding illegal
activities of the company or scandals

“not publicly known”¾Reverse engineering
trade secret that can be acquired byreverse engineering of marketed products- information easily acquired by simple
analysis of the product- information obtained by highly skilled
work that needs considerable timeCategories of infringement
Unfair Competition Prevention Law specifies six categories
of conducts as infringement of trade secret.
Category A Improper acquisition of trade secret¾ A-1 to acquire trade secret by improper method¾ A-2 to receive the trade secret with knowledge or grossnegligence¾ A-3 to receive the trade secret without knowledge, butlater become aware of the improper acquisition* the trade secret can be used within the scope oforiginal contract.

Categories of infringement (Continued)
Category B Misuse of properly acquired trade
secret¾ B-1 to use/disclose the properly disclosed trade
secret for the purpose of unfair businesscompetition or for the purpose of causing
damage to the holder¾ B-2 to receive the trade secret with knowledge
or gross negligence¾ B-3 to receive the trade secret without
knowledge, but later become aware of theimproper use/disclosure* same as A-3

Categories of infringement (Continued)
Issues¾An employee acquired trade secret from
his/her company¾An employee jointly developed the trade
secret (information shared)¾An employee developed the trade secretRemedies
1. Injunction¾ Quick devalue of trade secret- injunction for limited term
¾ Scope of injunction- to prevent business itself when appropriate
2. Compensation for damages
3. Necessary measures to restore businesscredibility

Negative prescription¾No claim for injunction for 3 years since
the holder of trade secret knew theinfringement¾No claim for injunction for 10 years since
the infringement started

1-2 Contract

1. Interpretation of agreement
2. Remedies¾ Injunction (Civil Code Art.414)¾ Compensation

1-2 Contract (continued)
3. Categories(a) Employment agreement¾ Duty to keep confidentiality, to avoid engaging incompetitive business¾ Balance with freedom to choose occupation¾- need explicit term to impose the duties¾- practice: for 2 years after resignation(b) Joint Research and Development¾ Development of its own after the termination ofbusiness collaboration¾ Residuals provision(c) Merger, Capital tie-up

1-3 Procedural protection¾Order to keep confidentiality (equivalent toprotective order)¾Restriction on disclosure of trial record¾Closed trial session

2. Criminal sanction(a) Unfair Competition Prevention Law¾ Up to 5 years imprisonment and fine forindividuals¾ Fine (up to 150,000,000 yen) for companies¾ Conducts outside the boundary can be punished¾ Reason for rare prosecution- imposed on specific conducts- only upon complaint- subjective requirements- civil disputes by nature2. Criminal sanction (continued)(b) Criminal CodeTheft, embezzlement, breach of trust

zThank you.