Introduction
On June 24, 2026, the Japan Fair Trade Commission, the Small and Medium Enterprise Agency, and the Japan Patent Office published guidelines aimed at protecting the intellectual property of small and medium-sized enterprises. These guidelines position not only typical forms of intellectual property, such as design drawings and patent rights, but also know-how and internal company data accumulated over many years, as subject matter requiring protection. They also indicate that conduct by companies in a stronger bargaining position, such as refusing to enter into nondisclosure agreements, compelling the disclosure of trade secrets, or treating the consideration for deliverables as including the consideration for intellectual property, may violate the Antimonopoly Act or the Act on the Fairness of Entrusted Transactions with Small and Medium-Sized Enterprises.
The essence of this news is not limited to the protection of SMEs. It concerns the very way Japanese companies should evaluate and contractually handle products, prototypes, design drawings, data, know-how, and the results of joint research. In other words, this development shows that we have entered an era in which the “price of manufacturing” and the “price of knowledge” must be considered separately.
Why Is the “Extraction” of Intellectual Property a Problem?
SMEs often manufacture products, create prototypes, or participate in joint development projects in response to orders from large companies. In that process, important information that is not readily visible from the outside is exchanged, including manufacturing technologies, design improvements, quality control know-how, processing conditions, and test data.
The problem is that this kind of information may be transferred free of charge, or at an unreasonably low price, merely as an incident of the transaction. For example, when an ordering party requests not only delivery of a product but also design drawings or CAD data, those drawings or data may contain value that goes beyond a mere work product. Similarly, if only one company obtains a patent for an invention created through joint development, and the party that contributed to the outcome is not paid appropriate consideration, this may effectively amount to the extraction of intellectual property.
For SMEs, intellectual property and know-how are sources of competitiveness. Even if they are inferior to large companies in terms of production equipment or workforce scale, many SMEs survive in the market through processing technologies in specific fields, improvement know-how accumulated on-site, and the ability to respond to individual customer needs. If such core assets are improperly leaked, the loss is not merely the loss of a single transaction. It may mean the loss of future revenue opportunities themselves.
What Matters Is Not Only “Entering into an NDA”
One point that deserves attention in these guidelines is the treatment of nondisclosure agreements, or NDAs. When confidential information is disclosed, entering into an NDA in advance is the basic practice. Requesting disclosure of information without entering into an NDA, or refusing to enter into an NDA while demanding the provision of trade secrets, may become problematic in business transactions.
In practice, however, an even more important point is that merely entering into an NDA as a matter of form is not enough. Unless the parties specifically define what constitutes confidential information, for what purposes it may be used, to whom it may be disclosed, and how it must be handled after the contract ends, sufficient protection may not be available in the event of a dispute.
SMEs in particular may submit drawings, specifications, processing conditions, and test data simply because an ordering party asks them to do so. However, the legal relationship differs greatly depending on whether such materials are based on the SME’s existing technology, newly created for the transaction at issue, or constitute the results of joint development. Before handing over information, it is essential to organize the nature of that information.
The Significance of Separating Consideration for Deliverables from Consideration for Intellectual Property
What is especially significant in practice under these guidelines is the idea that the parties should separately discuss “consideration for deliverables” and “consideration for intellectual property.”
For example, when a company manufactures and delivers a prototype, the manufacturing cost of the prototype itself is not the same as the value of the design concept, processing conditions, improvement know-how, and data for mass production contained in it. Payment for the prototype does not necessarily mean that the ordering party may automatically acquire the intellectual property and know-how behind it.
This point is likely to conflict with conventional business practices. Ordering parties may retain the sense that, because they have paid the cost, the entire set of results belongs to them. On the other hand, contractors may agree to provide intellectual property or know-how that should originally be subject to separate discussion because they fear losing an ongoing business relationship.
However, proceeding with a transaction while leaving the consideration for intellectual property ambiguous can lead to serious disputes later. Clarifying what is included in the delivered items and what is subject to an additional license or assignment is a form of risk management for both the ordering party and the contractor.
In Joint Research and Development, “Contribution” Matters
In joint research and development, issues concerning the ownership of results become particularly complex. Contributions can take many forms, including bearing research and development costs, providing technical ideas, conducting experiments or prototyping, and accumulating data.
Therefore, when only one party obtains a patent for the results of joint research and development, it is necessary to discuss consideration and terms of use in accordance with the other party’s contribution. It cannot be called fair business practice for the party with greater financial power, the ordering party, or the party that drafts the contract to unilaterally acquire the results.
What matters here is that looking only at patent rights is insufficient. In joint research and development, many intangible assets are created in addition to inventions that are filed as patent applications, including experimental data, failed test data, evaluation methods, manufacturing conditions, and directions for improvement. These may not be converted into registered rights, but they can have extremely high business value.
Accordingly, joint research and development agreements should organize in advance the ownership of results, the party responsible for filing applications, implementation rights, licenses to third parties, improvement inventions, confidential information, and the scope of use of data. A contract is not a mere formality. It becomes a blueprint that affects future business development.
How Should the Imposition of Litigation Risk Be Viewed?
The news also points out that, when intellectual property litigation with a third party arises as a result of business operations, there are cases in which responsibility for dealing with the dispute is imposed on the company in the weaker position. This is an extremely important issue.
For example, even if a contractor manufactures a product in accordance with the specifications of the ordering party, and that product is alleged to infringe a third party’s patent rights, it does not necessarily follow that the contractor alone should bear responsibility. The allocation of responsibility should vary depending on whether the ordering party specified the specifications, whether the contractor selected the technology, and which party was in a position to conduct an investigation.
In intellectual property disputes, various costs and risks arise, including investigation costs, attorneys’ fees, design change costs, risks of sales suspension, and risks of damages. Contractual clauses that impose all of these burdens on one company may constitute an unfair burden depending on the parties’ relative bargaining power. The purpose of the guidelines in stating that responsibility for resolving such issues should be shared within a legitimate scope lies in the idea that intellectual property risks should also be considered within the overall fairness of the transaction.
There Are Benefits for Ordering Parties as Well
These guidelines tend to be understood as measures to protect SMEs, but they also have important significance for ordering parties.
First, clarifying the scope of acquisition of intellectual property and know-how can reduce the risk of future disputes. If information is received while matters remain ambiguous, the recipient may later face allegations of unauthorized use or disputes concerning the ownership of joint development results.
In addition, paying appropriate consideration for intellectual property contributes to the sustainability of the supply chain. Unilaterally absorbing the technical capabilities of contractors may appear profitable in the short term. In the medium to long term, however, SMEs with technical capabilities may become weakened, resulting in a decline in their development capabilities and supply capabilities. This is not desirable for ordering parties either.
Furthermore, a business stance that respects intellectual property is important from the perspectives of compliance and sustainability. Amid the growing emphasis on appropriate price pass-through and fair subcontracting practices, the fairness of intellectual property transactions may also become part of corporate evaluation.
What SMEs Should Check Immediately
For SMEs, these guidelines are not merely materials published by administrative authorities. They can serve as a practical checklist for reviewing their own transactions.
First, SMEs need to take inventory of their technical information and know-how. The starting point is to organize which information may be disclosed externally and which information should be managed as confidential. If a company wishes to protect information as confidential, it must manage it as confidential internally and ensure that it can be expressly identified as confidential information under contracts.
Next, SMEs should thoroughly implement the practice of entering into NDAs before starting transactions. In particular, important information is likely to be disclosed at the quotation, prototyping, and joint consideration stages, even before a formal contract is executed. If information management is insufficient at this stage, it may become difficult to assert rights later.
Moreover, it is important to clarify in contracts the treatment of deliverables, intellectual property rights, know-how, data, improvement inventions, and allocation of responsibility in the event of infringement of third-party rights. Matters not written in a contract may be interpreted unfavorably depending on the bargaining power in the transaction. Particular care is required with ambiguous expressions such as “complete set,” “included in the deliverables,” or “provide necessary materials.”
Intellectual Property Is a Matter for Negotiation
The most significant message conveyed by these guidelines is that intellectual property is not something that is naturally transferred free of charge. It is a matter for negotiation.
Just as parties negotiate product prices, delivery dates, and quality, they must also negotiate the treatment of intellectual property, know-how, and data. In future business practice, it will be essential to clarify what information will be disclosed, the scope within which use will be permitted, whether rights will be assigned or merely licensed, and how consideration will be determined.
For SMEs, this is not only a defensive measure to protect their own technology, but also a proactive means of having their own value properly recognized. Protecting intellectual property does not merely mean enclosing rights. It is a prerequisite for ensuring that a company’s technology is properly evaluated and used under appropriate conditions.
Conclusion
The guidelines published by the JFTC and other authorities not only strengthen the protection of SMEs’ intellectual property, but also pose an important question to Japanese business practices. That question is whether, in business-to-business transactions, companies properly recognize the value not only of “visible deliverables,” but also of “less visible knowledge and data.”
Until now, drawings, know-how, test data, and the results of joint development have often been handled ambiguously within business relationships. However, in an era in which technology and data are central to competitiveness, continuing to handle them ambiguously can undermine corporate growth potential.
SMEs need to re-recognize their intellectual property and know-how as assets that should be protected. Ordering parties should also understand that respecting the intellectual property of business partners leads to long-term competitiveness and a stable supply chain.
These guidelines do more than set out minimum rules for intellectual property transactions. They indicate the basic stance required in future business-to-business transactions: properly evaluating intellectual property, paying consideration for it, and fairly allocating responsibility. To protect the technologies of the SMEs that support Japanese manufacturing, this way of thinking must become firmly established in the field of contract practice.