In this case, the Plaintiff filed a lawsuit seeking damages and an injunction against the Defendant, who was a director of the Plaintiff and took away his business card folders (“Folders”) containing business cards of the Plaintiff’s customers when he resigned. The Plaintiff claimed that the customer information included in the Folders (“Information”) was the Plaintiff’s trade secret and that the Defendant’s use of the Information for the Defendant’s business violates the Unfair Competition Prevention Law. The following is a summary of the judgment which determined whether the business cards were eligible as a trade secret (Article 2, paragraph 6 of the Unfair Competition Prevention Act).
A “trade secret” is defined as “a production method, sales method, or any other technical or operational information useful for business activities that is controlled as a secret and is not publicly known” under the Unfair Competition Prevention Act. The requirements for information to be qualified as trade secret are as follows: (i) the information must be controlled as a secret; (ii) the information must be useful information from a business or technological perspective; and (iii) the information must be non-public.
With regard to requirement (iii), the court ruled that the Information could possibly be categorized as non-public information if the Folders were considered as a curated aggregate of business cards, whereas each individual business card was clearly public information (because business cards are distributed freely to many people). However, as to the requirement (ii), the court rejected the argument that the cards were ‘useful’ because the Folders contained only information included on the business cards of the customers and no additional information such as details of transactions with customers or estimation of future transaction with customers. In addition, as to the requirement (i), the court held that the Information had not be controlled as a secret by the Plaintiff because there was no regulation or direction concerning the management of business cards obtained by either its director or employee through its business and the Plaintiff left the management of business cards to the discretion of its director or employees.
There have been cases where customer information contained in a list or database of customers is argued to be a trade secret. In such cases, the main issue has been usually whether the information is controlled as a secret (requirement (i)). This case concerned business card folders which had not yet been incorporated into such a list or database of customer information. It is notable that the court in this case ruled on the usefulness of the folder of business cards (requirement (ii)), as well as the requirement (i).
In the light of the judgment by the court in this case, in order for business card folders to be protected as trade secret, they have to be well organized, similar to a list or database of customers, in addition to being controlled as secret. As it seems practically not easy for a company to manage business card folders in that way, the actual hurdle would be high for business card folders to be protected as a trade secret.