Decision On The Effective Date Of The Amendment Of The Unfair Competition Prevention Act

By the Cabinet decision of October 9, 2015, the Partial Amendment of the Unfair Competition Prevention Act, which was enacted on July 3, 2015, will come into force on January 1, 2016. However, the amendment to extend the statute of limitations relating to bringing injunction claims against an unauthorized use of trade secrets to 20 years is already in force.

The Amendment includes: (i) an extension of the scope of conduct subject to criminal penalties with respect to trade secret misappropriation; (ii) an imposition of larger criminal fines for such crimes (e.g., heavier penalties for cross-border cases: up to one billion JPY against legal entities) and forfeiture of criminal proceeds; (iii) making trade secret infringement prosecutable without a complaint from the victim; (iv) prohibition of the assignment, import and export of products that infringe on trade secrets; and (v) lightening of the burden of proof of a plaintiff in a civil suit. These amendments are intended to act as stronger deterrents against trade secret misappropriation.

Specifically, the scope of acts potentially subject to criminal penalties has widened to cover the wrongful overseas acquisition of a trade secret owned by a person doing business in Japan. For example, the overseas theft of trade secrets stored by a Japanese company on an overseas server will now be subject to criminal penalties. Additionally, the increased scope covers attempts to misappropriate a trade secret as well as acts of using or disclosing a trade secret obtained with the knowledge that the trade secret has been disclosed wrongfully for the purposes of profit-making or causing damage, as per (i) above.

Moreover, the assignment, importation and exportation of goods produced by an infringing use of technical trade secrets have become a new type of unfair competition act (excluding cases where the person did not know, without gross negligence, that certain goods were infringing goods at the time they were obtained). Criminal penalties for such types of acts have also been added, as per (iv) above.

In a civil suit, the plaintiff has typically borne the burden of proof to establish that the defendant manufactured goods using a trade secret obtained wrongfully. However, it is usually difficult for the plaintiff to establish its case because the necessary evidence is usually possessed by the defendant. Therefore, the Amendment has introduced, so as to lighten the burden of proof of the plaintiff, a rebuttable presumption that the defendant manufactured its goods using the plaintiff’s trade secret relating to a manufacturing method of goods, should the plaintiff be able to prove that the defendant wrongfully acquired the trade secret and manufactured goods that can be produced using the trade secret, as per (v) above.

Companies should still strengthen the management of their trade secrets and take all measures to prevent misappropriation of trade secrets. On the other hand, given the greater criminal penalties under the Amendment, companies will need to pay closer attention so as not to infringe on the trade secrets of other companies.

(Article by John C Roebuck, Yuichiro Mori, Masatoshi Adachi,Harukuni Ito, Takako Yako, Kyosuke Katahira, Hiroyuki Fujimoto,Rika Hashimoto, Christopher Grant and Kazumasa Watanabe)