METI SOLICITING PUBLIC COMMENTS ON STRENGTHENING TRADE

UNCLAS TOKYO 000037

SIPDIS

DEPT FOR EAP/J
USDOC FOR 4410/ITA/MAC/OJ/ROTH
JUSTICE FOR ANTI-TRUST DIVISION CHEMTOB
DEPT PASS USTR FOR BEEMAN AND HOLLOWAY

E.O. 12958: N/A
TAGS: ECON ETRD EINV JA
SUBJECT: METI SOLICITING PUBLIC COMMENTS ON STRENGTHENING TRADE
SECRET PROTECTIONS


1. Summary and Action Request: The Ministry of Economy, Trade and
Industry (METI) is soliciting public comments on the contents of a
recent draft report from its Industrial Structure Council's
Intellectual Property Subcommittee. Among other measures, this
report recommends stronger efforts to protect Japan's trade secrets
during criminal prosecution of infringement of such secrets. A copy
of the Japanese language version of the report has been emailed to
EAP/J, as well as to Michael Beeman and Eric Holloway at USTR's
Japan Office. Embassy requests any USG comments on the report be
transmitted sufficiently in advance of the Ministry's deadline for
comments of 5:00 PM (Tokyo time) Friday, January 30, 2009 to allow
for translation and appropriate formatting. End Summary and Action
Request.


2. In its most recent recommendations under the bilateral
Regulatory Reform Initiative (RRI) Cross-Sectoral Working Group, the
USG urged Japan to "introduce a new procedure that will ensure that
the content of a trade secret will not become open to the public in
a criminal trial for trade secret theft." During the December 2008
RRI meetings, METI informed the U.S. delegation the Ministry's
Industrial Structure Council was studying the issue and a draft
report was imminent. The Ministry released the report, prepared by
the Council's Intellectual Property Policy Working Group
Subcommittee on Technical Information Protection, December 27, 2008
and is now soliciting public comments on the contents.


3. The bulk of the Sub-committee's thirteen-page report, entitled
"Possible Courses of Action on the Review of Criminal Prosecution of
Trade Secret Theft", highlights the need to strengthen Japan's laws
against trade secret theft, whether directly or via long-distance
means such as the Internet. The report noted when the GOJ
recognized the crime of trade secret infringement in 2003 by
amending Article 21 of the Unfair Competition Prevention Law, the
government intentionally set the legal pre-requisites for the crime
very cautiously, as the concept was new to Japan's criminal code.
Since that time, however, companies that are victims of trade secret
theft have become increasingly reticent or hesitant to report the
crime for fear their secrets could be revealed in court proceedings.
The report concludes that amidst the global business environment,
"failure to improve the current situation regarding criminal
prosecution of theft of trade secrets could lead to the stagnation
of domestic industry and deterioration of the international
competitiveness of domestic companies."


4. As to the specific measures to prosecute trade secret theft and
protect trade secrets during the court proceedings, the report
notes, "the legal system that protects trade secrets held by
companies should be built upon acknowledgement of the important role
of trade secrets in modern society, and after due consideration of
their proprietary nature, regulations and laws need to be
sufficiently effective in such situations." Based on such
considerations, "new legal measures to prevent trade secrets from
becoming public during criminal court process should be considered
as expeditiously as practicable".


5. The Sub-committee's report acknowledges Article 82 of the
Japanese Constitution guarantees defendants the right to open trial.
Nevertheless, the subcommittee finds, "it is undeniable that the
interests of the victims of trade secret theft may be undermined if
the contents of relevant trade secrets become public during the
court process. Under current criminal court procedures there are no
special measures to prevent relevant trade secrets being revealed
during the trial process. Therefore, at present, owners of trade
secrets have no choice but to depend on the ingenuity of
prosecutors, the presiding judge's control of litigation, and
utilization of existing procedures to protect their rights."


6. While such measures could be effective in some cases, the report
also points out that "in the current situation it is not possible to
fully assuage the uneasiness and uncertainty of having to depend on
the cooperation and understanding of those involved in managing
court cases" and "there are limitations to the use of control of
litigation under existing procedures." The Subcommittee therefore
discussed such tangible proposal as: (1) allowing judges to decide
to eliminate oral presentation for issues concerning the content of
trade secret; (2) allowing examination of witnesses outside the
trial date in the case where the relevant trade secret may be
revealed; and (3) establishing rules to clarify specific
requirements to limit publicity of a trial, defined under the main
clause of the Paragraph 2, Article 82 of the Constitution. "A study
of legal measures to protect trade secrets during criminal court
process concerning the crime of infringement of trade secret is
necessary, from the perspective of the protection of trade secrets
that could be deemed to be extremely valuable, with due
consideration to the need for publicity of a trial, while ensuring
not to disrupt the facilitated court process. Therefore, the

Ministry of Justice (MOJ) and METI should jointly consider the
tangible concept, and aim to compile a concrete final draft as
expeditiously as practicable", the report concludes.


7. In addition to measures related to court proceedings, the draft
report also recommends the GOJ consider other measures to strengthen
criminal prosecution of trade secret theft, including: (1)
strengthening penalties for the theft of trade secrets by
encroaching the management systems established by the trade secret
owners; (2) modification of the legal requirement for determining
the crime of trade secret infringement from the current legal basis
of "using the secrets for the purpose of unfair competition" to
"using the secrets for the propose of providing benefits for the
infringer directly, or for the benefit of a third party outside the
company, or for the purpose of causing damage to the company"; (3)
criminalizing certain types of trade secret theft, such as "illegal
obtaining of trade secrets by those responsible for the management
of those secrets, for dishonest purposes, in contravention of their
specific management responsibilities"; and (4) separate
criminalization of the use or disclosure of trade secrets that are
obtained illegally.

SCHIEFFER