Japan Update: Trade Secrets – Legislation and legal definition

What legislation governs the protection of trade secrets in your jurisdiction? How is a ‘trade secret’ legally defined? 

The Unfair Competition Prevention Act (the Act) governs the protection of trade secrets. The Civil Code also applies to more general aspects, such as the statute of limitations and tort and contract law principles.

A ‘trade secret’ is defined in the Act as ‘a production method, sales method, or any other technical or operational information useful for business activities that is kept secret and is not publicly known’.

Ownership

How is ownership of a trade secret established?

Under the Act, the concept of ‘ownership’ of a trade secret is not recognised. Instead, those (persons or entities) whose business interests have been, or are threatened to be, infringed on by misappropriation or illegal disclosure shall have the right to seek an injunction.

In practice, the scope of those persons or entities qualified for such injunction right is usually identical to those (persons or entities) who lawfully keep the trade secret in secrecy (for convenience, such persons or entities are referred to as ‘holders’ of trade secrets hereinafter).

Secrecy

What criteria are used to establish the state of secrecy of a trade secret before misappropriation or disclosure? 

To qualify as a ‘trade secret’ protected under the Act, information must be kept secret by the holder. The holder’s subjective intention to keep the information as a secret alone is not sufficient to meet this requirement. The information must be actually and objectively kept secret by appropriate measures that are deemed reasonable in the circumstances in a way that the holder’s intention can be objectively recognised. Also, the information must not be publicly accessible or obtainable by a third party with reasonable efforts (including by easy reverse engineering).

In practice, the following factors are often taken into consideration:

• whether the access to the information is limited; and
• whether the person who does access the information can recognise that the information is a secret.

Also, the following circumstances would support the secrecy of information:

• marking as ‘confidential’;
• storage in cabinets that can be locked;
• control by passwords;
• creation of a list of trade secrets; and
• execution of a confidentiality agreement.

By Anderson Mori Tomotsune, Japan, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact japan@transatlanticlaw.com

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