Revisions to Japanese Unfair Competition Prevention Act and IP Laws to Take Effect June 2023

The Cabinet of Japan recently approved the Bill for Partial Revision of the Unfair Competition Prevention Act, etc. (不正競争防止法等の一部を改正する法律案) (the “Bill”) amending Japan’s Unfair Competition Prevention Act (不正競争防止法) (the “UCP Act”) and other intellectual property (IP) laws.[1] These revisions reflect an effort by the Japanese government to modernize Japan’s laws and accommodate the ever-evolving IP-related needs of multinational corporations.

Key changes introduced by the revisions include:

1. Strengthening IP protections in light of the diversification and digitalization of businesses by expanding types of registerable trademarks and copyrights and strengthening protections against data breaches and infringement in the digital space.
2. Developing IP procedures in response to the COVID-19 pandemic and ever-increasing digitalization by allowing for online service of process and online submission of applications for IP rights.
3. Supporting international business development by imposing stricter penalties for bribery of foreign officials and clarifying procedures for international trade secret infringement cases.

Strengthening IP Protections

Unfair Competition Prevention Act: The Bill expands the UCP Act to cover digital counterfeits, allowing entities to seek a court order enjoining online distribution of such counterfeits. Accordingly, if someone engages in the sale of counterfeits in a digital space, the rights holder may file a request for an injunction. The UCP Act also recognizes the emerging service of providing big data to third parties and the need to protect such data by expanding the rights of data owners to seek an injunction and other remedies in the event of a data breach. The UCP Act previously offered similar protections for big data, but only where the data had not been kept secret.[2]

Moreover, the UCP Act increases penalties for unfair competition. Traditionally, a harmed entity could only seek lost profits or reasonable royalties—i.e., (i) the profits that the harmed entity would have earned in light of the harmed entity’s manufacturing and marketing capacity to exploit demand for the product at issue but for the unfair behavior; (ii) the equivalent amount of infringer’s profits generated by unfair competition activities; or (iii) reasonable royalties. Following revision of the UCP Act, in addition to the lost profits described in (i), the harmed entity will be able to seek royalties towards the profits that the infringer earned beyond the harmed entity’s manufacturing and marketing capacity to exploit demand for the product.

Trademark Act: The Bill expands the types of registerable trademarks, allowing individuals who conduct business under their name to use that name as a trademark and allowing for registration of these name trademarks without the consent of others in certain cases. Additionally, while the Trademark Act continues to prohibit registration of trademarks similar to those already registered, the revisions allow for registration of similar trademarks if there is no risk of confusion as to the origin of the product and if the prior trademark owner consents to the registration. The Bill similarly amends the UCP Act so that trademarks registered accordingly are not considered anticompetitive.

Developing Digital IP Procedures

In response to the COVID-19 pandemic, revisions introduced by the Bill amend IP procedures to modernize and digitize Japan’s IP service system. For example, the Bill amends the Patent and Trademark Acts to allow for submissions of copies of proof of conception and reduction to practice if such proof exists in a digital format. Further, to better accommodate those doing business internationally, the revisions allow for lump sum payments for international registration of trademark applications.

International Business Development

Recognizing the need for stronger and clearer regulations for international businesses, the Bill amends the UCP Act to better implement the OECD Anti-Bribery Convention by increasing the statutory penalties for individuals who commit bribery violations. Further, the revisions penalize bribery committed overseas by foreign employees of Japanese companies. Both of these penalty provisions also expand the scope of punishment to cover corporations. The Bill further revises the UCP Act by providing that, even where there is an overseas violation of a Japanese company’s trade secrets, a lawsuit can be filed in Japanese court where Japanese antitrust law will apply.

While the Cabinet approved the Bill in March, the Bill will next move to the Diet for consideration and approval and will be implemented once passed in June 2023.

[1] The bill amends several bodies of Japanese IP law, including the Trademark Act (商標法), the Design Act (意匠法), the Patent Act (特許法), the Utility Model Act (実用新案法), and the Special Provisions for Industrial Property Act (工業所有権特例法).

[2] The rationale behind this earlier policy being that big data, if kept secret, would separately be entitled to trade secret protections.