Japan: Protection of trade secrets

Author: | Published: 30 Oct 2015
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Nagashima Ohno & Tsunematsu

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Tomohiro-Hen
Tomohiro Hen

Trade secrets, including technology and know-how, possessed by Japanese companies have contributed to the development of Japanese industry. However, recently there has been a constant outflow of trade secrets from Japan. Against this background, on July 10 2015, an act for the partial amendment (the Amendment) to the Unfair Competition Prevention Act (the Act) was promulgated. The objective of the Amendment is to strengthen the protection of trade secrets to an extent that compares favourably with that of trade secrets in foreign countries. The Amendment is required to take effect on January 1 2016. The Amendment covers many areas, one of which is addressed in this article.

The Act prohibits the acquisition, use or disclosure of trade secrets for the purpose of acquiring a wrongful gain or causing injury to the owner (the Violation), and under the existing Act, (i) an individual who commits a Violation can be imprisoned with hard labour for not more than ten years, and fined not more than ¥10 million ($83,300) or both; and, (ii) if an individual has committed a Violation concerning the business of a company, the company can be fined ¥300 million. However, this sanction has been considered to have no meaningful effect, because frequently wrongful gains acquired through the Violation are enormous and often exceed the amount of the fine imposed on the violator.

In light of this, the Amendment seeks to strengthen penal regulations concerning a Violation. Most importantly, under the Amendment, (i) the Japanese government is able to confiscate all wrongful gains acquired through the Violation, regardless of the amount thereof, ie, there is no limitation on the amount that is subject to confiscation by the Japanese government. In addition, (ii) the Amendment raises the ceiling on the fine above (for an individual: ¥20 million, and for a company: ¥500 million). Further, (iii) the Amendment also introduces an intriguing additional penalty: if an individual has committed a Violation concerning the business of a company for the purpose of using (including making someone use) trade secrets overseas, the company can be fined ¥1 billion.

I believe that the Amendment helps Japanese companies to proactively protect themselves against the outflow of trade secrets, and it will contribute to maintaining their international competitiveness.

Tomohiro Hen