The fact-finding survey recently published by the Japan Fair Trade Commission (JFTC) is highly significant in that it sheds light on how intangible assets held by small and medium-sized enterprises (SMEs), such as intellectual property, know-how, and data, are actually treated in business transactions. What is particularly noteworthy is that practices such as refusing to conclude nondisclosure agreements, demanding the submission of confidential data, and forcing the royalty-free transfer of copyrights after delivery are beginning to be framed not merely as “common hard bargaining tactics,” but as conduct that may constitute an abuse of a superior bargaining position under the Antimonopoly Act.
Until now, the extraction of intellectual property and know-how has often been discussed as a matter of contract practice or trust between companies, and there have been many situations in which the discussion did not go so far as to address illegality. However, the findings of this survey suggest that the JFTC has now sent a clearer message into that ambiguous area. The improper acquisition of intangible assets is not merely a moral issue; it is also conduct that distorts fair competition.
What the Survey Results Show Is Not “A Few Exceptional Cases,” but “A Structural Problem”
In this survey, responses were obtained from 6,973 companies across 91 industries. Of these, 3,824 companies possessed intellectual property and similar assets, and among them, 603 answered that they had accepted disadvantageous transaction terms they found unreasonable. In addition, 658 companies reported that they had been pressured to disclose data or know-how. These figures indicate not a collection of isolated incidents, but a problem of considerable breadth.
Particularly important is the phrase “accepted.” It suggests the reality that, rather than freely agreeing to the terms, these companies were in effect unable to refuse because of concerns such as maintaining ongoing business relationships, preserving sales, and the imbalance of power with their business partners. Even if contracts or agreements were formally concluded, there were likely many cases in which the negotiations could hardly be described as substantively equal.
In other words, the essence of the issue is not poor manners on the part of a few companies, but a structure in which SMEs are unable to adequately protect their own intellectual property and know-how within the power imbalance between ordering parties and contractors. The fact that the JFTC has introduced the legal perspective of “abuse of a superior bargaining position” into this discussion is highly significant.
Why Are Intellectual Property, Know-How, and Data So Easily Undervalued?
If the matter involved equipment or raw materials, it would be obvious to anyone that taking them without paying would be problematic. However, intangible assets such as intellectual property, know-how, and data are invisible, easily replicated, and difficult to define clearly. As a result, under labels such as “show it to us for reference,” “submit it for joint consideration,” or “disclose it as a prerequisite for placing an order,” there is a tendency for their provision to gradually come to be treated as a matter of course.
Moreover, SMEs themselves sometimes disclose information before adequate contractual terms are in place because of business pressures. If they explain proposals without first entering into a nondisclosure agreement, or deliver prototypes or work products without clearly defining ownership of intellectual property, disputes are more likely to arise later over questions such as whose information it is and how far it may be used.
The reported practices of refusing to conclude nondisclosure agreements and forcing royalty-free copyright transfers after delivery are precisely examples of exploiting this vulnerability. The stronger the other party’s position, the more easily an unspoken pressure can arise that says, in effect, “If you do not agree, future business will be difficult.” Precisely because intangible assets are hard to see, they are easily taken without clearly defining the consideration or the terms.
What Will Be Asked Going Forward Is Not Merely “Is There a Contract?”
The JFTC, the Small and Medium Enterprise Agency, and the Japan Patent Office are reportedly planning to formulate guidelines and seek improvements. From a practical standpoint, however, this is not simply a matter of preparing standard contract templates. To be sure, nondisclosure agreements and clauses on the ownership of intellectual property are important. But what will truly be tested is whether the substance of those contracts and negotiations was fair in practice.
For example, requesting the submission of detailed materials without first entering into a nondisclosure agreement, demanding excessive disclosure of data or know-how at the proposal stage, or naturally expecting a transfer of rights after delivery may all have been overlooked in the past as common commercial practice. Going forward, however, such conduct will likely no longer be excused as “just how business is done.” Instead, the relevant questions will be whether the demand is reasonable, whether the consideration is appropriate, and whether the other party had a genuine freedom to refuse.
For companies placing orders, this is not merely an issue for legal or intellectual property departments. It will require a review of operations extending to procurement, development, sales, and business units as well. The reason is that seemingly routine requests for information made at the operational level may create competition-law risks.
For SMEs, the Lesson Is Not Only “Secure Rights,” but Also “Make Management Visible”
From the standpoint of SMEs, this survey reveals the reality of harm, but at the same time it also highlights the challenges of self-protection. When people speak of protecting intellectual property, they tend to think immediately of filing patent applications or securing copyrights. In reality, however, that alone is not enough. It is critically important to identify which information qualifies as trade secrets, which data is confidential, and who disclosed what, when, and to what extent, and to ensure that these matters are managed consistently within the company.
Concluding a nondisclosure agreement is only the starting point. In addition, there are many measures that should be taken before and after disclosure, such as marking disclosed materials as confidential, limiting the purpose of disclosure, prohibiting removal or secondary use, and clearly defining ownership of rights in deliverables and derivative results. These basic steps are especially likely to be postponed when a company is rushing to win an order. However, the cost of leaving such matters ambiguous often becomes much greater later.
Furthermore, given that many companies appear to have continued transactions despite being dissatisfied with the terms, there are limits to what individual firms can achieve on their own. In that sense, the development of official guidelines should also function as a form of support that makes it easier for SMEs to say, “That is unfair.”
This Cannot Be Overlooked from the Standpoint of Japan’s Competitiveness Either
This issue is not limited to the protection of SMEs. It also concerns Japan’s industrial competitiveness itself. In many fields, SMEs accumulate unique technologies, manufacturing know-how, operational data, and design ingenuity, and these assets support the competitiveness of the entire supply chain. If such intangible assets continue to be extracted without appropriate compensation, in a way that does not contribute to the profits or growth of the providing companies, incentives for technological development will weaken.
Even if large companies or higher-tier business partners appear to benefit in the short term, in the long term this will erode the very foundation that produces new technologies and added value. Protecting intellectual property, know-how, and data is not merely a matter of protecting rights holders; it is a foundation for maintaining a healthy innovation environment. This survey is significant in that it has made that recognition explicit at the level of competition policy.
The Next Focus Will Be Whether “Strict Enforcement” Can Be Made Effective
The JFTC has stated that it will deal strictly with violations. This stance is commendable, but the key question going forward is how far this can be translated into concrete operational practice. To truly bring about behavioral change in the field, abstract warnings alone will not be enough. It will be necessary to show, through concrete examples, what kinds of conduct are problematic, under what transaction conditions such conduct may be justified, and what kinds of compensation arrangements and contract terms are desirable.
It will also be important to establish consultation channels that SMEs can use easily, to collect information in ways that protect anonymity, and to create mechanisms for identifying signs of guideline violations. One of the difficulties of this type of problem is that violations tend not to come to light. As long as companies are reluctant to speak up for fear of losing business, the system itself must be designed with corresponding ingenuity.
Conclusion
What this news shows is that intellectual property, know-how, and data are no longer merely “ancillary issues in contract practice,” but lie at the very core of fair transactions themselves. Failing to conclude a nondisclosure agreement, treating confidential data as something that can naturally be demanded, and pressuring the other party into a royalty-free transfer of rights after delivery—such conduct should no longer be overlooked as conventional business custom.
For SMEs, it is becoming increasingly important to properly inventory their intangible assets, make visible the information that must be protected, and clarify the terms during contract negotiations. On the other hand, companies placing orders are being called upon to move away from the mindset of absorbing the other party’s成果 and information by relying on their stronger position, and instead to collaborate under appropriate compensation and clear rules.
I believe the JFTC’s latest fact-finding survey should be taken seriously as a signal marking such a turning point. Attention will now focus on whether the guidelines to be formulated going forward will amount to more than mere cautionary statements and instead become effective standards capable of changing the common assumptions that govern business transactions.