This case involved the situation described below.
Defendant B, former executive director and technical advisor of Company A’s sensor division, and Defendant C, production engineering manager of Company A, were charged with misappropriation of trade secrets based on the fact that during a meeting on April 9, 2013, both Defendants unlawfully disclosed technical trade secrets relating to the wire alignment process of magnetic sensors owned by Company A to an employee of another device manufacturer, employee D.
The Nagoya District Court held that the technical information which both Defendants explained to employee D of another device manufacturer during the meeting cannot be said to be information not generally known or not easily obtainable; therefore, the information does not satisfy the condition of being of a non-public nature, which is one of the three requirements for trade secrets, and granted both Defendants a full acquittal. The acquittal has been finalized.
1. Concerning the prosecutor’s argument for the wire alignment process, the information explained during the meeting, and the information actually disclosed
a) The tab portion called the drawer chuck (hereinafter referred to as “chuck”) grips the amorphous wire and moves to the right above the substrate while applying a certain level of tension.
b) The amorphous wire is temporarily fixed while tension is applied.
c) The substrate fixing base, with the substrate fixed in place, is raised and positioning adjustments are performed using the temporarily fixed amorphous wire as a reference line.
d) The substrate fixing base is raised, and the amorphous wire is inserted into the guide groove of the substrate and temporarily fixed through the magnetic force of the magnet embedded in the substrate fixing jig.
e) The amorphous wire is mechanically cut on the left side of the substrate.
f) The substrate fixing base descends and moves to insert the next amorphous wire.
g) Steps a) to f) are repeated mechanically.
a) The chuck picks up an amorphous wire with a diameter of 5 to 10 μm from the wire supply section, applies tension to the wire, and moves it upward toward the substrate at a maximum pull-in speed of 1.2 m/min in a rightward direction.
b) Tension is applied to the amorphous wire so that it is stretched straight and temporarily fixed by “holding it in place” with two rod-shaped objects on the left side of the substrate.
c) The base with the 60 mm square silicon substrate fixed to it is raised and the position of the amorphous wire and the grooves in the substrate are adjusted.
d) The amorphous wire is inserted between pins spaced 50 μm apart on the substrate, a jig with magnets embedded in the substrate fixing base is put in place, and the wire is temporarily fixed in place using the magnetic force of the magnets.
e) Using a YAG laser, a cut is made between the two rod-shaped objects described in (b) above while tension is applied.
f) The substrate fixing base descends and moves to insert the next amorphous wire. A mechanism that moves the substrate 50 μm at a time and a mechanism that moves it 1 μm at a time are required to maintain a spacing of 200 to 300 μm between each wire.
g) Steps a) to f) are repeated mechanically.
a) The chuck grips the wire and moves it to the right above the substrate.
b) The wire is temporarily fixed while tension is maintained.
c) The substrate fixing base with the substrate fixed in place is raised and the position of the wire and the grooves in the substrate are adjusted.
d) The substrate fixing base is raised, and the wire is inserted into the groove of the substrate and temporarily fixed in place through the magnetic force of the magnet embedded in the substrate fixing jig.
e) The wire is cut.
f) The substrate fixing base descends and moves along the Y-axis direction to insert the next wire.
g) Steps a) to f) are repeated mechanically.
2. Court judgment on the non-public nature of the information actually disclosed
The information actually disclosed cannot be recognized as the trade secrets of Company A.
In other words, the information explained during the meeting is related to the process of aligning amorphous wires on a substrate; however, there are significant differences between the functions and structure of Company A’s wire alignment device and the process of aligning amorphous wires on a substrate using the same device. Furthermore, the disclosed information in this case has omitted the ingenuity required to precisely arrange the wires on the substrate based on the characteristics of amorphous wires. As a result, the information has been overly abstracted and generalized, and even when viewed as a series of integrated processes, it is merely a combination of common methods. Thus, the information disclosed in this case cannot be recognized as being of a non-public nature.
3. Court judgment on the prosecutor’s arguments
During the meeting, the two Defendants did not disclose the functions and structure of Company A’s wire alignment devices No. 1 to No. 3, nor did they disclose the process of aligning wires on a substrate using those devices. With regard to a collection of multiple pieces of information, determining whether the information can be considered non-public should be based on whether it is generally available outside the control of the trade secret holder while taking into consideration factors such as the ease of combination, and the time and financial cost required to obtain it. The information actually disclosed has omitted information relating to significant ingenuity, and even when viewed as a combination of information, it cannot be said to be not generally known or not easily obtainable.
When comparing the content of an explanation relating to a certain process with trade secrets relating to a process held by the aggrieved party, even if the information is truly different from the trade secrets held by the aggrieved party, should both processes have common issues and purposes, then it is usually possible to find some commonalities at some stage by abstracting and generalizing the two processes. When it comes to the issues and purposes of aligning amorphous wire on a substrate, since wire is sold rolled on a reel, a general process requires straightening the wire off the reel. It is also necessary to align the placement of the substrate and the wire. Furthermore, it is necessary to cut the wire. In addition, if two or more wires are to be placed on the substrate, such a process must be repeated mechanically. It is easily known that such processes are necessary. Moreover, as the content of the processes is abstracted and generalized, they become more commonplace processes that are generally known or easily obtainable.
When comparing the content of an explanation relating to a certain process and trade secrets relating to a process held by an aggrieved party, if there is a big difference in technical information between the two or the content of explanation was information of which significant ingenuity is omitted, we can only identify common elements by abstracting and generalizing the process to a considerable extent. The content of explanations provided by the two Defendants regarding the wire alignment process during the meeting contained significant differences from Company A’s wire alignment process in terms of important processes, and the significant ingenuity of Company A’s trade secrets relating to the wire alignment process was omitted. As a result, it must be said that the elements of information in the explanation by the Defendants common with Company A’s trade secrets had become information that was either generally known or easily obtainable.
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, three cases, including this case, have recently resulted in acquittal; thus, these cases, including the reasons, are worth noting (the other cases being: a case in which the confidentiality of customer information which 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)); and a case in which the Sapporo High Court denied the confidential nature of information which was recorded in a customer’s electronic ledger and which was of an important, non-public, nature and useful, on the grounds that confidentiality measures were insufficient, overturning the original decision of the first instance (Sapporo High Court Decision of July 6, 2023 (Case No. 74 (U) 2023))).
2. Concerning Summaries 1 to 3 of the Judgment
When a company or another organization chooses to keep its proprietary technical information confidential as a protection strategy, in addition to having legal protection as trade secrets under the Unfair Competition Prevention Act, source materials from the research and development stage and daily business operations, which embody and materialize the technical information in question, might be preserved as evidence of prior use under the Patent Act, as a countermeasure against a third party attempting to patent the same technical knowledge.
However, in quite a few cases, preserving the source materials themselves as evidence is not sufficient to obtain such legal protection. The reasons are: in actual cases of misappropriation of technical information, unauthorized users often use the holder’s form of implementation in part or modify it, resulting in the likelihood of the issue being raised of whether the form of use by the unauthorized user is identical to the technical information held by the holder; and in actual cases of prior use of patented inventions, prior users often change the form of implementation of their inventions later, and therefore, under the theory of inventive problem solving, the identity between the modified form of implementation and the prior invention is likely to become an issue (with reference to the Supreme Court Decision of October 3, 1986; the theory of inventive problem solving is a theory in which the scope of the effect of prior use rights includes not only the technology expressed in the form currently being implemented, but also technology that belongs to the same category as the invention in terms of inventive ideas).
Under such circumstances, further describing the technical information embodied in the source materials in the form of a specification and patent claims in advance, so as to provide evidence at the technical idea level, may be considered. In fact, there are several cases in patenting where leading companies “file applications with no intention from the outset of requesting examination” so that “the application can be withdrawn before publication and not made public, but can be used as evidence of prior use or trade secrets” (Institute of Intellectual Property “Research Report on the Publication System for Patent Applications” (March 2015) page 146 [in Japanese]). (However, it is necessary to note the differences between novelty, etc. as a patent requirement and non-public nature, etc. as a requirement for the protection of trade secrets.)
As mentioned above, the abstraction and generalization of technical information embodied in source materials at the technical idea level is actually used as a tactic in technical information confidentiality strategies, and is not immediately considered unacceptable abuse of laws.
(2) Determining the identification between the abstracted and generalized technology information and its source materials, and determination of the non-public nature of the technical information in question
However, particularly in cases related to trade secret misappropriation, when the source materials that embody technical information are themselves disclosed and acquired, etc., determining the identification of technical information and methods of determining such are not likely to be problematic. On the other hand, as in this case, when technical information embodied in the source materials is abstracted and generalized then disclosed and acquired, determining the identification between the technical information embodied in the source materials and the technical information abstracted, generalized, and then disclosed and acquired, etc., and the methods of determining such, are likely to be problematic.
(3) Two-stage test and filtration test
In copyright infringement cases, when determining whether the creative expressions of a plaintiff’s work and a defendant’s work are similar under the Copyright Act, two methods are generally used: a two-stage test, and a filtration test. The two-stage test is a method of determining whether the creative expression of the plaintiff’s work is original, and then determining whether the creative expression of the plaintiff’s work is reproduced in the defendant’s work. In contrast, the filtration test is a method of determining whether the common elements between the plaintiff’s work and the defendant’s work constitute creative expression.
Similarly, in cases involving trade secret misappropriation, when determining under the Unfair Competition Prevention Act the identification between technical information held by the holder and technical information disclosed or obtained by the alleged unauthorized user, as well as when assessing the non-public nature of such technical information disclosed or obtained by the alleged unauthorized user, adoption of not only a two-step test-like approach but also a filtration test-like approach are considered possible (Yamane, Takakuni, “The Significance of the Confidentiality Management Requirement and the Filtration Test in Trade Secret Misappropriation –Based on Two Acquittal Cases” Law & Technology, No.100, page 71 [in Japanese]). In fact, there are cases in which the court has denied similarity with software source code, and therefore the “use” of a trade secret by the alleged unauthorized user, using a determining method similar to the filtration test (Intellectual Property High Court Decision of August 21, 2019).
(4) Concerning Judgment Summaries 1 to 3
Under the above-mentioned circumstances, in Judgment Summaries 1 to 3 the court denied the non-public nature of the technical information disclosed by the employees after abstracting and generalizing technical information held by the company, using a determining method similar to the filtration test.
【Keywords】misappropriation of trade secrets, Article 2 Paragraph 6 of the Unfair Competition Prevention Act, non-public nature, process of aligning amorphous wires on a substrate, abstraction, generalization, filtration test, full acquittal
※ 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 @.)