After more than a decade of successive incremental statutory and regulatory changes aimed at strengthening trade secret protection of in Japan, Japan really rolled up its sleeves in 2015 and made significant changes to protect Japanese companies from the perceived threat posed by its Asian neighbors to its crown technological jewels.
In Japan, trade secrets are protected by the Unfair Competition Prevention Act (“UCPA”). UCPA Article 2(6) defines a trade secret as: (i) technical or business information useful for commercial activities such as manufacturing or marketing methods, (ii) that is kept secret; and (ii) that is not publicly known. Historically, Japanese courts set the bar for protection very high and required companies to take seemingly extraordinary measures to protect their trade secrets. This, coupled with weak civil and criminal remedies, dissuaded many companies from asserting their trade secret rights in Japanese courts. The Japanese government, including the judiciary, took notice and in recent years, Japanese courts made it easier to prove the existence of a trade secret and afforded trade secrets greater protection. Nevertheless, statutory causes of action and remedies remained deficient.
Japanese lawmakers have revised the UCPA five times since 2003. Although the amendments were welcomed by the business community, there was still a sense that the laws left some loopholes for avoiding liability. In response, early last year, significant revisions were proposed and enacted to close these loopholes and expand the scope of liability under the UCPA to include bad actors beyond the immediate misappropriators and to countries beyond Japan’s borders. The three primary objectives of the amendments are to expand criminal penalties, increase deterrents to trade secret theft and implement more effective civil remedies. The chart below is a summary of the revisions to the UCPA, based on a presentation given by Japan’s Ministry of Economy, Trade and Industry in December 2015:
|Cause of Action/Remedy||Before 2015 Revisions||Effective from Jan. 1, 2016|
|Liability limited to the 2nd unauthorized misappropriator in the chain of custody||No limitation. Unauthorized misappropriators in chain of custody (i.e., 3rd, 4th, 5th …) may be liable|
|Attempted misappropriation||NO penalty or remedy||Liability arises for attempted trade secret misappropriation|
|Distribution of products made using misappropriated
|NO penalty or remedy||Civil and criminal remedies are available against trade secret infringing products|
|Misappropriation of trade secrets outside Japan||NO penalty or remedy||Liability in Japan for wrongful acquisition of trade secrets outside Japan|
|Maximum fine for trade secrets misappropriation||Natural person:
10 million YenCorporation:
300 million Yen
20 million YenCorporation:
500 million YenEnhanced fines available for specific crimes that adversely affect the Japanese economyNatural person:
30 million YenCorporation:
1 billion Yen
|Prosecution||NO prosecution without a complaint filed by the injured party||Prosecution possible without a complaint filed by the injured party|
|Discretionary confiscation of products||NO procedures for confiscation||UCPA contains procedures for discretionary confiscation|
|Reduction of Burden of Proof||Plaintiff has burden to prove all of
the following facts:
|Plaintiff relieved of burden to prove the following fact if it can meet certain requirements:
Defendant has burden to provide counter evidence that technology was internally developed or acquired from third party.
*Amended UCPA provides that only technical trade secrets regarding manufacturing methods enjoy the reduction of burden of proof.
|Statute of Limitations||10 years after the start of wrongful use||20 years after the start of wrongful use|
And if that was not enough, so as not to be outdone by the U.S. International Trade Commission’s newly found aggressiveness on extraterritorial misappropriation of trade secrets, Japan is also considering future amendments to its customs procedures to enhance the ability of customs officials to stop the importation of products that contain misappropriated trade secrets.
All and in all, the amendments to the UCPA will make the enforcement of trade secret rights in Japan meaningful and economically justifiable for owners to pursue.