Development in Protection of Trade Secret (TS) in Japan JPAA International Activities Center Naoki Okumura October 20-21, 2015 AIPLA Annual Meeting IP Practice in Japan Committee Pre-Meeting

1.Enhanced Institutional Deterrence 2.Improving Scope of Punishment 2 Purpose of the Legislation

Background

1. Nippon Steel & Sumitomo Metal v. Posco (KR) –TS misappropriation case –Filed before Tokyo District Court in Toshiba v. SK Hynics (KR) –Filed before Tokyo District Court in Benesse (criminal case) –Serious leakage of customers’ information occurred in 2014 by intentional act of employee 4 Background

1.Serious leakage –Causing so much damage to Biz activity 2.“Open and/or Close policy” –Patent application or protection as TS? –Application for Patent is not the only effective way to protect IP 5 Background (Contn’d)

Detterence

Deterrence Raising fines (Unfair Competition Act Article 21(1)and(3) ) –Individual up to 10 M JPY to 20 M JPY –Legal entity up to 300 M JPY to 500 M JPY –Using a JP company’s TS in other countries or acquiring and leaking TS, intending to use it overseas, is subject to heavier penalty(Individual: 30M JPY, Entities: 1billion JPY) Confiscation of criminal proceeds(UCA Article 21(10)) 7

Deterrence To accuse misappropriation of TS in criminal procedure –No need for formal complaint from victims any longer(Article 21(5)) –Authorities can start criminal proceedings without formal complaint from victims 8

Presumption Clause in civil litigation (Article 5 bis) –Currently BOP on the plaintiff to prove use of TS. –When P proves: A)D improperly (or, with knowledge or gross negligence) acquired TS of P; B)TS is related to a method of producing goods* or techniques provided in the Rule;and C)D is making goods which are possibly produced using P’s TS * excluding products not related to a method of manufacturing goods, e.g., sales manuals. Deterrence 9

Presumption Clause in civil litigation (Article 5 bis) –the suspected products are presumed to be those manufactured by D using TS. –BOP on D !! Deterrence 10

Deterrence Prohibiting assignment, import and export of products infringing TS, subject to injunction (civil charge)(Article 2(1)(X)) –Knowledge or gross negligence required Making such case also subject to criminal charge (criminal charge)(Article 21(1)(IX)) –Knowledge is required 11

Scope of Punishment

Improving Scope of Punishment Expanding the scope to add a person who acquired TS with the knowledge that such TS’s disclosure is improper and resold it (21(1)viii). –Current act limits the scope only to those who directly received TS from a person who had received it improperly. 13 Misappropriator Direct Receiver

Improving Scope of Punishment Adding an act of acquiring TS overseas. –Subject to criminal charge(Article 21(6)) –Including act of acquiring TS, under management of Japanese companies, which are stored in overseas servers. 14

Improving Scope of Punishment Making (only) “attempts” to infringe TS also subject to criminal charge(Article 21(4)). –Previously only accomplished crimes are subject to criminal charge 15

Potential Effects of Legislation Effective Date –Within six (6) months from July 10, 2015 Easier to protect TS? –The GV official says “Japan’s TS secret protection is one of the best in the world ” Should be more careful! 16

17 Naoki OKUMURA Nakamura & Partners Shin-Tokyo Building 6th fl. 3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo JAPAN THANK YOU!!