​Japan debate on Big Data IP protection hits classic issue of regulation v. innovation

17 March 2017. By Toko Sekiguchi.

The Japanese government's latest discussion over protecting Big Data as corporate assets underscores the difficulty of regulating cutting edge technology.

The main theme of a meeting today on trade secrets of Japan's Industrial Structure Council's intellectual property committee was how to create industry rules that would award companies investing in data management, while encouraging its creative usage without fear of violating proprietary laws.

The ongoing meetings of the expert panel, held across the intellectual property divisions of several government agencies, are exploring the addition of Big Data as assets that companies can lay claim to in case of wrongful access. The main focus is on the types of data that fall outside the protection of existing intellectual property laws — copyright, patents and trade secrets.

The Ministry of Economy, Trade and Industry, or METI, is leading the discussion over a legal framework that allows for companies to create value in the enormous amounts of data collected by artificial intelligence and the so-called Internet of Things, or IoT. The goal is to revise the Unfair Competition Prevention Act to outlaw wrongful access to such data held by companies.

The key, both government and businesses agree, is striking the right balance that incentivizes both investment and innovation. The development of data markets, as well as the increasing number of infringement cases, shows a clear need to update IP rules to consider them as corporate assets.

But academics and business representatives on the panel repeatedly raised red flags on creating overly broad rules on technology that is still in its early stages. Basic issues such as the definition of data and what defines them as worth protecting were left for future discussions.

For example, one suggested benchmark was whether a company invested significant resources in acquiring and managing the data in question. But what happens if technological advances quickly make the same information publicly available cheaply or even for free?

"Japanese companies are extremely rule compliant. Regulatory overreach may drive innovative companies away," said Google Japan's head of legal, Yuko Noguchi, who was one of about a dozen experts on the panel.

Noguchi pointed to the EU's 20-year-old database protection rule, currently under review, as a cautionary tale that may have obstructed free flow of data and innovation in the EU, giving Silicon Valley a vast head start in the ensuing years.

"We don't want a situation where certain activities are illegal for Japanese companies in Japan, but the same type of activities overseas by foreign companies are fine," said Hidetaka Aizawa, a professor of IP law at Hitotsubashi University.

Moreover, a new METI survey of companies and how they manage their trade secrets released at today's meeting showed that an overwhelming majority of small- and medium-sized enterprises, or SMEs, were taking little to no measures to protect their proprietary information.

Panel members asked: should additional access control be implemented, at the risk of inhibiting corporate innovation, when so many companies are too ignorant or complacent to even defend trade secrets, which are protected by existing laws?

Japan's competition regulator, the Japan Fair Trade Commission, meanwhile, has started looking into the implication of Big Data on competition policy. When asked earlier in the week about the ongoing IP discussion and how that might affect the JFTC's study, Secretary General Hideo Nakajima said that the commission has only just begun its research, and didn't expand further.