The amended Unfair Competition Prevention Act, which was enacted on July 3, 2015, has been in force since January 1, 2016.  The purpose of the amendment is to enhance trade secret protection.

Background

Japan has been faced with the situation where many valuable trade secrets owned by Japanese companies have been leaked to foreign countries; one of the main factors causing such circumstance is the increase in the number of Japanese engineers who have been moving to other Asian companies.  In addition to that, two shocking events where highly valuable trade secrets owned by well-known Japanese companies (Nippon Steel & Sumitomo Metal Corporation and Toshiba Corporation respectively) were leaked to Korean Companies through retired engineers (in Toshiba’s case, through a retired engineer in SanDisk (Toshiba’s affiliated company)) prompted Japan to amend the Unfair Competition Prevention Act in order to enhance trade-secret protection.

Summary of the amendment

Under the amended Act, the scope of trade secret protection has been expanded particularly in the sense of criminal penalty.  First, the sales, import and export of products manufactured with wrongful use of a trade secret have been added to the subject of criminal penalty as well as civil remedy.  Secondly, the scope of the parties who could be penalized in the case of trade secret misappropriation has been extended to all of the parties who subsequently acquire a trade secret (under the former Act, it was limited to the “first” acquirer and the “second” acquirer).  Thirdly, in addition to wrongful “use” and “disclosure” in a foreign country of the trade secret acquired in Japan, wrongful “acquisition” in a foreign country of Japanese companies’ trade secrets has been added to the subject of criminal penalty.  Fourthly, the “attempt” to misappropriate trade secrets has also been added to the subject of criminal penalty.

Then, the maximum amount of the fines imposed in the case of committing trade secret misappropriation has been raised.  It has been raised from 10 million JPY to 20 million JPY for an individual person and from 300 million JPY to 500 million JPY for a legal entity but what should be emphasized here is that wrongful use of a trade secret in a foreign country as well as wrongful acquisition and disclosure of a trade secret in Japan for the purpose of its wrongful use in foreign countries have been subject to severer penalties; in such case, the maximum amount of the fines has been raised to 30 million JPY for an individual person and 1 billion JPY for a legal entity.  This amendment illustrates that the main purpose of the amendment is to prevent Japanese companies’ valuable trade secrets from being wrongfully used in foreign countries.  In addition to that, the amendment to enable a public prosecutor to start prosecuting an individual committing trade secret misappropriation without a complaint submitted by a trade secret holder and the amendment to enable a court to forfeit, at its discretion, the profit obtained from committing such misappropriation are expected to enhance criminal law enforcement.

The amendment also facilitates a trade secret holder’s recourse to civil remedy.  First, the burden of proof on the fact that a trade secret was wrongfully used by a defendant for manufacturing a product has been shifted to the defendant.  The plaintiff does not need to prove such fact since it is presumed under the amended Act, provided that the plaintiff successfully proves that he owns a trade secret for manufacturing the product and that the defendant wrongfully acquired the trade secret.  Secondly, the statute of limitations for injunction against misappropriation of trade secrets has been extended from 10 years to 20 years (this amendment has been in force since July 10, 2015 (the promulgation date of the amended Act)).

Comments

In Japan, before the amendment, only one individual, who committed trade secret misappropriation, was sentenced to imprisonment without a stay of execution (in the abovementioned case where Toshiba’s highly valuable trade secret was leaked); it may be said that criminal penalty enforcement for the protection of trade secrets has been insufficient.  Now it is expected that the criminal penalty enhanced in the sense of scope and extent as mentioned above will actually be enforced for deterring any parties from misappropriating valuable trade secrets owned by Japanese companies.