This case involved the situation described below.
Defendant Y1, an employee of Company A which was engaged in the procurement and sale of automotive parts, was shown an electronic customer ledger which recorded the history of Company A’s customers, products sold, sales amounts, etc., and later
(2) on October 28, in collusion with Defendant Y2, accessed Company A’s server, displayed Information ② relating to customer D and, using the image-capture function of LINE, obtained Information ② as an image file.
The court of first instance (Sapporo District Court Decision rendered on March 17, 2023 (Case No. 915 (Wa) 2021)) identified facts (1) and (2) above to be in violation of Article 21, Paragraph 1, Item 3(b) of the Unfair Competition Prevention Act, and finding Defendants Y1 and Y2 guilty of misappropriating trade secrets, sentenced them to pay fines of 300,000 yen each. Both defendants appealed against the ruling.
Summarized below are the reasons the judgment of the first instance affirmed the confidentiality of the information in question.
The information in question was:
(2) restricted to employees by requiring an ID and password to access the ● system; and
(3) output from the ● system with a warning screen and a consent confirmation, meaning that an employee who output the information in question from the electronic customer ledger would be made aware by the warning that they were prohibited from leaking the information in question to anyone outside the company.
In light of the above, it is recognized that the management of the information was such that employees would fully be aware of its confidentiality. Thus, the confidential nature of this information can be affirmed.
In contrast to the above, the Sapporo High Court rejected that the information in question was confidential in nature, overturned the original decision of the first instance, and acquitted both defendants.
1. Concerning the Nature of the Information
The information in question included Company A’s sales figures for Company B and Company D, as well as information on the cost price of goods purchased from Company C, and was objectively useful for Company A’s sales activities. Therefore, it is information that could easily put Company A at a disadvantage in business dealings if it became known to competitors or business partners. In light of the above, it is recognized that the information was such that Company A needed to prevent any leaks to outside parties, that the information was neither actually publicly known nor leaked to the general public, and that it was easy for employees of Company A with access to the information to be aware of its nature. However, in order for the information in question to be considered a “trade secret” under Article 21, Paragraph 1, Item 3 and Article 2, Paragraph 6 of the Unfair Competition Prevention Act, it is considered necessary that Company A clearly demonstrates to its employees its intention to manage the information confidentially through economically rational confidentiality management measures, and as a result employees can easily recognize this intention, in addition to the information’s usefulness and non-public nature described above.
2. Presence or absence of confidentiality management measures
(2) The header of the warning text is “Scope of use of data provided by Company E”, so it is natural to interpret that the focus of the restrictions on providing information to third parties, etc. is confidential information such as the file layout provided by Company E and accessible through the ● system. The warning text ends with the statement “Providing data to a third party is a breach of contract”, and it is natural to assume that “contract” here refers to a contract between Company A and Company E. At the end of the warning screen is displayed “For details, please check the ‘Non-disclosure Agreement’ that you have signed”. In light of the above, if we look Article 1, Paragraph 2, Item 1 of the “Non-disclosure Agreement” provided by Company A to Company E, the scope of confidential information that is subject to restrictions on the provision of information to third parties clearly excludes purely company-specific data that company A has input, created, registered, etc. through the use of the ●● system, and it is understood that the information in question, which is considered to be Company A’s purely company-specific data that falls under this category, is not subject to restrictions on the provision of information to third parties in the warning screen mentioned above. Therefore, since the purpose of the warning screen mentioned above is understood to be preserving confidential information such as Company E’s file layout, it cannot be seen as a manifestation of Company A’s own intention to manage confidential information.
(3) Although Company A requires each employee to sign a confidentiality agreement when they join the company, it is objectively not clear whether the information in question is covered by the confidentiality agreement, and it is difficult to conclude that Company A has expressed its intention to manage the information in question as confidential.
(4) In light of Company A’s employment regulations, it is understood that the information in question falls under the category of information that is prohibited from being taken outside the company, but it is questionable whether the procedures for ensuring that Company A’s employees were made fully aware of the employment regulations were carried out properly. Moreover, in light of the fact that there is no indication that Company A had warned its employees about the handling of trade secrets, it cannot be said that the measures for managing confidentiality were sufficient in this respect.
1. Introduction
The number of criminal cases involving the misappropriation of trade secrets has been increasing since the 2015 amendment to the Unfair Competition Prevention Act, which was designed to strengthen protection of trade secrets. For example, over the past ten years the number of cases of trade secret misappropriation resulting in an arrest has more than doubled, from 11 in 2004 to 26 in 2023 (Director of the Community and Economic Affairs Department, Community Safety Bureau, National Police Agency “Status of Arrests for Economic Crimes in 2023” (April 2024) p. 20 [in Japanese]). This trend of an increasing number of criminal cases involving misappropriation of trade secrets is expected to intensify, not weaken, with the enforcement from April 1, 2024, of the 2023 amendment to the Unfair Competition Prevention Act, which further strengthens the protection of trade secrets and clarifies the procedures for cases of international trade secret misappropriation. On the other hand, it is also assumed that the rate of conviction in criminal cases involving trade secret misappropriation, which are on the rise, will be extremely high, as is generally the case with criminal trials in Japan in general (see the Supreme Court General Secretariat, “2022 Annual Report on the Administration of Justice, Summary Edition, Part 2: Criminal Cases” (August 2023) p. 5, regarding the final classification of cases in the first instance of ordinary criminal trials in district courts [in Japanese]). However, under these circumstances, it is worth noting that three cases, including this case, have recently resulted in acquittal (the other cases being: a case in which the non-public nature of a common part of a holder’s technical information on magnetic sensors and the information disclosed by the defendant was denied through a filtration test (Nagoya District Court Decision of March 18, 2022 (Case No. 427 (Wa) 2017)); and a case in which the confidentiality of customer information that the holder has formed and accumulated, of little use and not publicly known, was denied (Tsu District Court Decision of March 23, 2022 (Case No. 282 (Wa) 2020))).
2. Concerning Summary 1 of the Judgment
Concerning one of the requirements for the protection of trade secrets under the Unfair Competition Prevention Act, namely the requirement for management of confidentiality (Article 2, Paragraph 6 of the Unfair Competition Prevention Act), in light of recent court decisions following the complete revision of the Trade Secret Management Guidelines on January 28, 2015, important technical information tends to be more easily recognized as confidentially managed even when access restrictions are not thorough (Osaka High Court Decision of May 11, 2018 (Case No. 2772 (Ne) 2017); Osaka District Court Decision of October 19, 2017 (Case No. 4169 (Wa) 2015) (High-Strength Alumina Long Fibers Case); Nagoya High Court Decision of April 13, 2021 (Case No. 162 (U) 2020), (Paint Mixing Chart Case); Tokyo District Court Decision of December 9, 2022 (Case No. 129 (Toku-wa) 2021) (Mobile Phone Base Station Information Case)). On the other hand, although the number of cases where confidentiality management was denied has decreased overall, the number of cases where non-public nature and usefulness were denied has increased, so the ratio of cases where trade secrets are recognized or denied does not seem to have changed much. In addition, perhaps due to the situation where non-public nature and usefulness can also be considered as substantive issues, recent court cases before and after the above-mentioned complete revision have demonstrated that business information which lacks non-public nature and usefulness tends to be easily denied confidentiality management due to the existence or absence of appropriate measures to be taken to make it clear that such information is a trade secret (Tokyo District Court Decision of February 25, 2005 (Case No. 18865 (Wa) 2004) (List of hospital prescribed drugs); Tokyo District Court Decision of October 30, 2007 (Case No. 14569 (Wa) 2006) (Business Cards Information Case); Tokyo District Court Decision of November 26, 2008 (Case No.853 (Wa) 2007) (Supplier Information Case); Aomori District Court Decision of February 25, 2019 (Case No. 188 (Wa) 2015); Tokyo District Court Decision of October 28, 2020 (Case No. 14136 (Wa) 2019) (Business Card Information Case); Intellectual Property High Court Decision of February 21, 2023 (Case No. 10088 (Ne) 2022); Tokyo District Court Decision of August 9, 2022 (Case No. 9317 (Wa) 2021) (AI Information Case)).
In light of both trends mentioned above, the issue of this case was whether confidentiality management could be recognized with regard to business information, which is important, not publicly known, and highly useful. In Summary 1 of the judgment, the court stated that even if the business information is important, not publicly known, and highly useful, it is not enough that an employee be able to recognize this fact subjectively, but that objective confidentiality management measures by the company that holds the information are also required. The content of the court’s decision in Summary 1 can be understood as consistent with the view of the Trade Secret Management Guidelines and previous court cases in relation to management of confidential information, in that it is still necessary for a company to show its intention to manage the information confidentially through confidentiality management measures, although access restriction is merely one measure for ensuring that employees are aware of the company’s intention of confidentiality management.
3. Concerning Summary 2 of the Judgment
(2) Concerning Summary 2 (2)
As mentioned above, according to the Trade Secret Management Guidelines, in general, a measure is required as a confidentiality management measure to distinguish the information in question from general information and to clearly indicate the information in question is a trade secret. In this case, a warning measure or other measures are required to be directly related to the information in question in the electronic customer ledger, and it is insufficient that a warning measure apply to the information relating to the trade secrets of the system vendor. Therefore, the content of Summary 2 (2) is understood to be consistent with the Trade Secret Management Guidelines. (However, it should be noted that the part of the Guidelines to require the distinguishment of secret information from general information has been deleted in the amendment in March, 2025.)
(3) Concerning Summary 2 (3)
Under the Trade Secret Management Guidelines, measures to clearly indicate the information in question is a trade secret is mainly considered to apply to selecting the media or displaying the media, restricting who can access the media, listing the type and categories of information that are trade secrets, and to clarifying confidentiality obligations required under confidentiality agreements, etc. According to several court cases (Intellectual Property High Court Decision of November 17, 2021 (Case No. 10038 (Ne) 2021); Tokyo District Court Decision of March 23, 2021 (Case No. 20127 (Wa) 2018) (Life Insurance Customer Information case); Intellectual Property High Court Decision of February 21, 2023 (Case No. 10088 (Ne) 2023); Tokyo District Court Decision of August 9, 2024 (Case No. 9317 (Wa) 2021) (AI Information case)), general and abstract confidentiality obligations stipulated in employment regulations or confidentiality agreements are considered insufficient. Therefore, in this case, a general and abstract confidentiality agreement at the time of joining the company is insufficient, and it is considered necessary to clarify that the information in question is subject to an employee’s confidentiality obligations. Thus, Summary 2 (3) is understood to be consistent with the Trade Secret Management Guidelines and previous court cases.
(4) Concerning Summary 2 (4)
Under the Trade Secret Management Guidelines, measures to clearly indicate the information in question is a trade secret are mainly considered to apply to selecting the media or displaying the media, restricting who can access the media, listing the type and categories of information that are trade secrets, and to clarifying confidentiality obligations required under confidentiality agreements, etc. Under the Trade Secret Management Guidelines and in view of several court cases (Intellectual Property High Court Decision of November 17, 2021 (Case No. 10038 (Ne) 2021); Tokyo District Court Decision of March 23, 2021 (Case No. 20127 (Wa) 2018) (Life Insurance Customer Information case); Intellectual Property High Court Decision of February 21, 2023 (Case No. 10088 (Ne) 2023); Tokyo District Court Decision of August 9, 2024 (Case No. 9317 (Wa) 2021) (AI Information case)), the actual circumstances of management of confidential information by a company is given greater emphasis than confidentiality obligations stipulated in employment regulations or confidentiality agreements.
Therefore, in this case, it is considered insufficient that the information in question is subject to the confidentiality obligations of an employee under a company’s employment regulations. Thus, Summary 2 (4) is understood to be consistent with the Trade Secret Management Guidelines and previous court cases.
4. Conclusion
As stated in 2 and 3 above, although it is difficult to immediately classify this judgment as a type of case in which the management of confidential information is denied, this case is understood to be consistent with the Trade Secret Management Guidelines and previous court cases.
【Keywords】Article 21, Paragraph 1, Item 3, Sub-item 2, of the Unfair Competition Prevention Act, Crime of Obtaining Trade Secrets, Article 2, Paragraph 6 of the Unfair Competition Prevention Act, Management of Confidential Information, Electronic Customer Ledger, Confidentiality Management Measure, Restriction to Access, Confidentiality Obligations
※ The contents of this article are intended to convey general information only and cannot be understood as providing any legal advice.
Kei IIDA (Writer)
Attorney at Law & Patent Attorney (Daini Tokyo Bar Association)
Contact information for inquiries: k_iida☆nakapat.gr.jp (Please replace ☆ with @.)