Japan’s Supreme Court gives first ruling on a Criminal Trade Secret Infringement
The accused Y is a person who worked at company A, an automobile company developing, manufacturing and selling automobiles. A disclosed to Y the information concerning A's automobile product planning, etc., which A kept secret and was not publicly known, by granting Y an ID, which was an identification code for accessing such information stored in A's server computer, and a password.
(1) On July 16 2013, Y, at home, for the purpose of wrongful gain, accessed A’s server computer via the personal computer loaned by A, and transferred folders that contained eight data files, including the aforementioned information concerning the automobile product planning, which had been stored in said personal computer in advance, from said personal computer to Y's own hard disk, thereby making copies of said data files (holding (1)).
(2) On July 27 2013, Y, at A's technical centre, for the purpose of wrongful gain, accessed the aforementioned server computer via said personal computer loaned by A, and transferred other folders that contained four data files, including the aforementioned information concerning the automobile product planning, from said server computer to Y's own hard disk, thereby making copies of said data files (holding (2)).
By doing so, Y obtained these trade secrets in breach of Y's legal duties regarding the management of the trade secrets.
Prerequisite facts found in the Supreme Court ruling of December 3, 2018
(1) At A, Y engaged mainly in product planning operations, but found a job at company B, another automobile company, and was to leave A as of July 31, 2013. At B, Y was supposed to engage in duties overseas, such as the development and planning of automobiles.
(2) The data files mentioned in holdings (1) and (2) above are A's original manuals and tool files, materials for management meetings and other meetings, materials on matters to be considered including unreleased product specifications, etc., and all of them had been kept as trade secrets by various methods, such as storing them in A's server computer subject to access restriction.
(3) Y was given a personal computer (laptop) loaned by A, and was authorised to use this to access the corporate network from outside the company. On the other hand, at A, Y was prohibited from using Y's own external recording medium for performing duties for the company or for accessing the corporate network, and also from storing the company's information on Y's individually-owned personal computer or external recording medium.
(4) On July 16, 2013, Y, at home, made copies of folders that contained the eight data files which were stored in the company's PC (holding (1)), to Y's own hard disk, and furthermore, on July 18, Y, at home, made copies of said folders from Y's own hard disk to Y's individually-owned personal computer. After that, during the period until July 26, which was set as the last working day at A, Y did not conduct any routine work or remaining work for A by using the aforementioned eight data files of which Y made copies.
(5) On July 26, 2013, Y made an offer to their superior to come to the office on the next day (July 27) for the reason of "stowing Y's personal belongings, etc." and obtained permission to do so. On said day, at A's technical centre, Y connected Y's own hard disk, which Y brought with them, to the company's PC and attempted to make copies of four folders, in which 5,074 data files in total (volume: about 12.8 GB), including the data files (holding (2)), were stored, to Y's own hard disk, but was able to make copies of only 3,253 data files in the end because the volume of data was huge.
Out of these folders, the three folders other than the "photographs of corporate gatherings" folder contained operational information regarding the initial stage of product planning, various survey materials, and materials for executive officers' suggestions, covering the whole process relating to A's automobile development from the initial stage of planning operations to the stage immediately before release.
Progress of proceedings
The Yokohama District Court determined the existence of the "purpose of wrongful gain" as referred to in Article 21(1)(iii) of the Unfair Competition Prevention Act (prior to amendment by Act No. 54 of 2015; the Act) in Y’s doings, affirmed a criminal trade secret wrongfully obtaining crime and sentenced Y to imprisonment for one year with a suspension of execution of the sentence for three years. The Tokyo High Court upheld the decision.
Reasons for a final appeal by the defence counsel
(1) The making of copies (holding (1)) was carried out for the purpose of organising operation-related data, and the making of copies (holding (2)) was carried out for the purpose of collecting commemorative photographs, and thus, Y did not have the purpose of utilising the relevant information as a direct or indirect reference at another company to which Y was to make a carrier move, when making these copies.
(2) In order to find that Y had the "purpose of wrongful gain" as referred to in Article 21(1)(iii) of the Act, any purpose that is highly punishable must be found in addition to the absence of a justifiable purpose and reason, and such an ambiguous purpose of utilizing the information as a direct or indirect reference at another company to which one is to make a career move, does not constitute the purpose of wrongful gain.
Holding of the ruling of December 3 2018, Supreme Court
The Supreme Court (Presiding Judge Yamamoto) stated that the reasons for a final appeal put forward by the defence counsel did not constitute any of the reasons for a final appeal as referred to in Article 405 of the Code of Criminal Procedure and dismissed the final appeal, holding as follows by its authority.
1 The defence counsel argues that the making of copies (holding (1)) was carried out for the purpose of organizing operation-related data. However, as mentioned above, there is no fact that Y performed duties for A by using the copies of the data files, and moreover, it is not found to be necessary or reasonable for Y, who was authorized to use the company's PC outside the company, and actually brought the company's PC home on July 16, 2013, as well, to have bothered to make copies of the data files (holding (1)) from the company's PC to Y's own hard disk and Y's own PC in order to perform duties for A. Taking these facts into consideration, it is found that the making of copies (holding (1)) was carried out for a purpose other than performing duties for A.
In addition, the making of copies (holding (2)) is found to have been carried out for a purpose other than performing duties for A because it is clear that Y did not need to perform duties for A on the day following the last working day at the company. Incidentally, although the four folders contained image data including commemorative photographs as argued by the defence counsel, such as those in the "photographs of corporate gatherings" folder, the number of such images accounts for a small portion of the whole, and the number of data files on automobile product planning, etc, makes up a significant majority. Moreover, Y intended to make copies of the full contents of all four folders, which is shown by the fact, for example, that Y had attempted to make copies of the same four folders two days before (July 25), and did not try to sort out the relevant image data that can be commemorative photographs. In light of these facts, the making of copies (holding (2)) cannot be considered to have been carried out only for the purpose of collecting commemorative photographs.
2 As mentioned above, Y made copies of the data files mentioned in holdings (1) and (2), which were trade secrets of the company where Y worked, to Y's own hard disk, immediately before leaving said company and making a career move to another company in the same business. Said making of copies was not carried out for the purpose of performing duties for the company where Y worked and there are no circumstances suggesting the existence of any other justifiable purpose. According to these facts of the case, it can be reasonably inferred that said copies were made for the purpose of using them for the benefit of Y him/herself, the company to which Y was to make a career move or any other third party other than the company where Y worked, after leaving the company where Y worked. Therefore, Y can be considered to have had the "purpose of wrongful gain" referred to in Article 21(1)(iii) of the Act. The determination of Tokyo High Court that upheld the judgment of Yokohama District Court to the same effect as above is justifiable.
Practical tips
This is the first ruling by the Supreme Court on whether or not a criminal trade secret infringement crime is constituted.
The case is that on July 29, 2013, immediately after the making of copies, operation logs check of the company's PC, which was to be carried out on the retiring employees, discovered that Y had made copies of a large number of the data files. On July 30, on Y’s returning from a trip, the supervisors and others received Y's own hard disk and Y's own PC from Y, to check the stored data files, and discovered each of the copied data files.
The case can be said that measures to prevent leakage of trade secrets were indeed effective given that operation logs check of the company's PC, a measure to prevent leakage of trade secrets which A carried out on the retiring employees, led to the detecting of Y’s making copies of the data files and preventing its leakage to outside parties.
Under the current circumstances that leakage of trade secrets by retiring and retired employees accounts for the largest number at around 40% [1], measures to prevent leakage of trade secrets through retiring and retired employees become more important and it may be necessary to implement measures to prevent leakage of trade secrets specific to retiring and retired employees separately from the measures for current employees. Examples of measures to prevent leakage of trade secrets include measures to restrict access rights at appropriate times, measures to physically and technically prevent the taking of media containing trade secrets outside the company, measures to detect leakage of trade secrets, and measures to eliminate evasions [2].
On the other hand, in this case it was not proved that each of the data files Y copied had been leaked to B or any other external party. As mentioned above, in this case, as the making of the copies was discovered by A immediately after Y made the second copy, it is not possible to specify from evidences based on his subsequent behaviour etc how exactly Y intended to utilise each data file Y copied. According to the commentary by judicial research official of the Supreme Court, even in such a case, the ruling states in line with the facts of the case that (i) as a judgment on a fact finding, in a case such as this case where an employee has obtained trade secrets immediately before making a career move to another company in the same business, if it was not carried out for the purpose of performing duties for the company where he/she worked and any other justifiable purpose (whistle-blowing, news report, labour union activities, etc.) did not exist, then it can be usually reasonably inferred by process of elimination that it was made for the purpose of using them for the benefit of himself/herself or any other third party such as the company to which he/she was to make a career move after leaving the company where he/she worked, and (ii) as a legal judgment, as far as such a purpose of using after leaving the company where he/she worked can be found, regardless of the specific method of use, he/she can be considered to have had the "purpose of wrongful gain" referred to in Article 21(1)(iii) of the Act [3].
The judgment of the Supreme Court is obviously appropriate, as it would provide a disincentive if the "purpose of wrongful gain" were denied because a company contacted a retiring employee immediately after discovering making of the copies of the data file and prevented the data file from leaking to outside parties, which would discourage a company from taking measures to minimise the damage.
The commentary by judicial research official of the Supreme Court states that "this ruling only presents a case-specific judgment in line with the case of a criminal trade secret wrongfully obtaining crime immediately before making a career move to another company in the same business" [4].
The reason for emphasising the factor of the timing immediately before making a career move may be that it is relatively easy to determine that the purpose of obtaining trade secrets is not for carrying out for the purpose of performing duties for the company where the retiring employee worked. Then, what if the retiring employee had systematically made copies of the data file several times in several months prior to his/her retirement, rather than immediately before he/she was to make a career move?
The method of judgment on a fact finding of the ruling of reasonably inferring the purpose of using after retirement by process of elimination itself seems to apply to this case, and in that sense the method of judgment of the ruling can be said to be general.
However, there is the problem that, compared to the case when making copies are made immediately before making a career move, it is more difficult to prove that the purpose of obtaining trade secrets is not for carrying out for the purpose of performing duties for the company where the retiring employee worked.
In such cases, it can be possible to prove that the retiring employee had decided to make a career move at the time of obtaining, that the obtaining method was unusual, that the data was useful and that the data was not actually used for the purpose of carrying out for the purpose of performing duties for the company where the retiring employee worked. This proof method in the criminal case may be useful in the civil case as well.
It is pointed out that the judgments of Yokohama District Court and Tokyo High Court also inferred that Y had the “purpose of wrongful gain” to refer at the company to which Y was to make a career move "etc.", expressing that the third party who would benefit was not limited to the company to which Y was to make a career move, but the ruling of the Supreme Court clearly expressed this, and it is noteworthy that the ruling stated that it can be reasonably inferred that Y had the purpose of using the trade secret not only for the benefit of the company to which Y was to make a career move but also for the benefit of the company to which Y was to make a career move or any other third party other than the company where Y worked [5].
Footnotes
[1] Information-Technology Promotion Agency, Kigyō ni okeru eigyōhimitsukanri ni kansuru jittai chōsa 2020 chōsa jisshi hōkokusho [Survey on the conditions of management of trade secrets in companies 2020 research report] 27-28 (March 2022), available at https://www.ipa.go.jp/files/000089191.pdf.
[2] Ministry of Economy, Trade and Industry, Himitsujōhō no hogo handobukku -kigyōkachi kōjō ni mukete- [Handbook for Protecting Confidential Information] 71-80 (May 2022), available at https://www.meti.go.jp/policy/economy/chizai/chiteki/pdf/handbook/full.pdf.
[3] Hirokazu Kure, Hankai [Commentary of Judgment], 72(10) Hōsō jiho, 165, 185-186 (2020).
[4] Hirokazu Kure, Hankai [Commentary of Judgment], 72(10) Hōsō jiho, 165, 186 (2020).
[5] Kazutaka Ueshima, Hanpi [Comments on Judgment], 37 Quarterly Jurist, 220, 223 (2021).
Takanori Abe is a partner at Abe & Partners. He is also guest professor, graduate School of Medicine, Osaka University. He can be contacted at: abe@abe-law.com
Today’s top stories
Design and Artists Copyright Society appoints new CEO
