JAPAN Trends and Developments Contributed by: Seiro Hatano, Rikiya Sato, Keiichiro Umino and Tomohiro Kuribayashi, TMI Associates
The revelation and settlement of this issue had a significant impact on Japanese companies’ awareness of the protection of trade secrets against their competitors. This case also led to the extensive 2015 amendments of the UCPA, to expand the protection of trade secrets and the scope of penalties for trade secret infringe - ments. These changes in industry awareness and extensive legal reforms led to an increase in criminal proceedings against trade secret infringements. Examples of Criminal Cases In line with this trend, several important criminal court decisions on trade secret infringements have been issued in recent years. Among oth - ers, one case attracted particular attention, as not only the individual who stole the trade secret but also the company who acquired it from such individual were prosecuted and found guilty. In this case, a former employee of a major sushi restaurant unlawfully took information on the costs and suppliers of the restaurant and shared it with the restaurant’s competitor. The former employee was sentenced to two years and six months of imprisonment, and was fined JPY1 million for taking such information and for other acts. The competitor company was also fined JPY30 million for obtaining and using this confi - dential information. This case demonstrates the recent trend in judicial decisions strictly judging the misappropriation of trade secrets. In addition to the above case, in a separate matter the court convicted a former employee of misappropriating trade secrets related to the technology for manufacturing lightweight glass bottles. According to the indictment, the defend - ant unlawfully extracted confidential information from his former employer’s secure systems and transferred it to a personal device with the intent of providing it to the Chinese glass manufacturer.
The former employee was sentenced to one year and six months in prison, with a three-year sus - pended sentence, and was fined JPY1 million. As highlighted above, recent trends in criminal cases involving trade secret infringement include employees or former employees taking trade secrets to competing companies, as well as the leakage of these secrets overseas. Trends in Civil Cases, and Overview of the 2023 Amendment Punitive damages cannot be awarded in civil litigation in Japan. In addition, litigation costs can be awarded as damages only to a very lim - ited extent. For example, attorneys’ fees may be recoverable only up to around 10% of the awarded damages amount. Furthermore, the amount of damages awarded in trade secret infringement litigation is generally modest, partly because it is not easy to prove that damage was caused by trade secret infringement. While trade secret infringement cases have become more complex and substantial in recent years, and the amount of damages claimed has tended to increase, when reviewing the court decisions in civil cases rendered over the past two years, in nearly half of them the plaintiff’s claim has been dismissed on the grounds that reasonable steps were not taken or that the defendant’s use of the trade secret was not found. In addition, even when the court ruled in the plaintiff’s favour, the amount of awarded damages was only around a few million Japa - nese yen, which is a small amount compared to other jurisdictions. As discussed above, there have been court cas - es where the owner of trade secrets hesitated to take legal action for misappropriation of trade secrets, taking into account the difficulty, costs
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