Thursday, March 10, 2016

Approach of Protecting Technologies as Trade Secrets

As I noted in the previous article, Japanese companies have been reducing domestic patent filing. Instead, they are currently trying to make better use of a trade secret approach to protecting their technologies.

They used to file patent applications in Japan only for many inventions, without counterpart foreign patent filing. As a result of such inventions being publicly disclosed (laid-open), they have become free technologies in other countries, even when they obtained patents in Japan. Furthermore, there are many patent applications for which a request for examination is not filed. In the Japanese patent system, a request for examination must be filed within three (3) years from the filing date of a patent application to start examination at JPO, and if the request is not filed, the patent application is deemed to have been withdrawn. Since this patent application is already publicly disclosed eighteen (18) months from its filing date, they become free technologies worldwide. Ideally, they should obtain patents in all major countries for all inventions. However, they are required to consider the cost of obtaining patents under their limited budgets. Under such a situation, they decided to use more actively a trade secret approach, while increasing international patent filing, to protect their technologies.

Government Measures
The Japanese government has implemented the following measures to assist Japanese companies to employ a trade secret approach.

1) Trade Secret Management Guidelines totally revised in January 2015 to indicate proper way to manage trade secrets, because there were many cases where plaintiff’s trade secrets were not admitted by a court as trade secrets to be protected under law (Unfair Competition Prevention Act) due to poor management of trade secrets.

2) Unfair Competition Prevention Act amended in July 2015 to improve the protection against  misappropriation of trade secrets. The maximum criminal fine for individuals is now 30M JPY,   and the maximum fine for non-natural persons (such as companies) is 100M JPY. Also, different criminal fines are set for domestic leakage and leakage outside Japan. Japan's investigating authority can start the investigation of a case without complaint by a victim. Furthermore, the burden of proof is changed in favor of trade secret owners. This amended act has been in effect since January 1, 2016.

3) Prior User Rights System Guidelines published in June 2006. Interestingly, Japan's domestic patent filing started decreasing in the same year. JPO re-released this guidelines in January 2015. This guidelines introduces time-stamping and electronic signatures as methods of increasing the evidential power of prior use.

4) Trade Secret “Safe Keeper” System introduced in July 2015. This is a JPO free service to store  company's trade secrets to help them prove the possession of trade secrets at the specific date.  Companies can store their trade secret data in the JPO's dedicated server after encryption. The background of this is that many companies have been facing difficulties to prove since when they have the trade secrets in question in court. This service will start soon.

In this way, the government is improving the environment to protect trade secrets. A trade secret approach does not require offensive activities such as patent enforcement, and thus may suit Japanese personality. That being said, Japanese companies are expanding their businesses internationally, and increasing foreign sales, as shown in the chart below. Therefore, the trend of increasing foreign patent filing will continue, but domestic filing is not likely increase for a while. However, there is some movement to develop the environment that encourages patent enforcement, and the situation may change in the future. Maybe I will note this in another article.

Source: METI Survey of Overseas Business Activity (July 2014)

Regarding “Safe Keeper” System above, METI (Ministry of Economy, Trade and Industry) announced that incorporated administrative agency INPIT (National Center for Industrial Property Information and Training) will start this service with the name of "Time-stamp storage service" on March 27, 2017. In this service, INPIT receives and stores a time-stamp token only which is generated by combining a hash value of a subject electronic document with time information by certification authority.

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