## Facts

- Kyowa Interface Science Co., Ltd. (Kyowa) manufactured and sold scientific measuring instruments, including products that used software to calculate contact angles.
- During employment at Kyowa, an individual programmer developed (or worked on) source code for a contact-angle calculation program used in Kyowa’s business.
- The programmer executed written confidentiality pledges concerning Kyowa’s confidential information, including trade secrets.
- After leaving Kyowa, the programmer joined NiCK Corporation (NiCK), a competitor associated with a former Kyowa sales representative.
- The programmer copied Kyowa’s program source code onto a personal computer and created an earlier version of NiCK’s competing contact-angle calculation program using that code.
- ASUMI GIKEN, Ltd. (ASUMI) distributed or sold the NiCK program.
- After Kyowa filed suit, a later version of the NiCK program was developed with different source code, and the evidence showed it did not incorporate Kyowa’s source code.
- The Tokyo District Court found trade secret misappropriation as to the earlier version, but denied relief directed at the later version because it was independently written.
- The defendants appealed. NiCK and ASUMI also asserted claims seeking damages for alleged harm to business reputation based on Kyowa’s allegations about the later, independently written version.

## Issues

1. Whether Kyowa’s contact-angle calculation program source code qualified as a “trade secret” under Article 2(6) of Japan’s Unfair Competition Prevention Act (UCPA), including requirements of usefulness, non-public status, and secret management.
2. Whether the programmer’s copying of the source code to a personal device and creation of NiCK’s earlier program version constituted unlawful acquisition and/or use of a trade secret under the UCPA.
3. Whether NiCK and ASUMI bore liability for the earlier version as entities that used and commercialized software created through misappropriation.
4. Whether a later version of the NiCK program, written with different source code, still constituted misappropriation merely because it performed similar functions or was developed after the earlier misconduct.
5. Whether NiCK and ASUMI could recover damages for alleged business reputation harm arising from Kyowa’s assertions about the later version, despite the finding of misappropriation regarding the earlier version.

## Decision

- The Intellectual Property High Court (Fourth Division) affirmed that Kyowa’s program source code met the UCPA definition of a trade secret.
- The court affirmed that the programmer’s conduct—copying Kyowa’s source code to a personal computer and using it to produce NiCK’s earlier program version—constituted trade secret misappropriation (an act of unfair competition) under the UCPA.
- The court upheld liability relating to the earlier version against the involved defendants, including those who sold the software derived from the misappropriated code.
- The court agreed that the later version used different, independently written source code and therefore did not constitute misappropriation on the evidence presented.
- The court rejected NiCK and ASUMI’s claims for damages for alleged harm to business reputation tied to Kyowa’s allegations concerning the later version, in light of the overall dispute and the established misappropriation of the earlier version.

## Legal Principles

- Under UCPA Article 2(6), program source code may qualify as a trade secret when it is (i) useful for business, (ii) not publicly known, and (iii) subject to secret management measures (such as confidentiality pledges and restricted access).
- Misappropriation under the UCPA focuses on acquisition, use, or disclosure of the protected confidential information itself; copying source code for use in a competing product is a paradigmatic form of improper acquisition and use.
- Liability may extend beyond the individual who copied the code to entities that use, distribute, or commercialize the product created through misappropriation, depending on their involvement and knowledge.
- Functional similarity between products is not enough for trade secret liability when the later product does not use the protected secret information; independently written code can defeat a claim targeting a later version.
- Claims for business reputation harm based on statements made in connection with enforcement efforts generally require unlawfulness beyond the act of asserting rights; where earlier misappropriation is proven, related allegations are less likely to support a damages claim.

## Conclusion

Kyowa Interface Sci. Co. v. NiCK Corp. is a leading Japanese software trade secret decision holding that employer-controlled program source code can be a UCPA trade secret and that copying and using that code in an earlier competing product version is actionable misappropriation, while a later independently written version—despite similar functionality—falls outside trade secret liability; the court also declined to award defendants damages for alleged reputation harm tied to the later version in the context of proven earlier misconduct.


Kyowa Interface Sci. Co. v. NiCK Corp., Chiteki Zaisan Kōtō Saibansho Dai 4-bu (Intell. Prop. High Ct. Apr. 27, 2016) (Japan).