Intellectual Property

When a newly hired employee brings in a former employer’s materials

A company discovers that the materials an engineer it recently hired has been using at work contain design data and customer information belonging to the engineer's former employer. What the company has to decide at that point is not only what to say to the former employer. It also needs to establish how far the contents of those materials have spread within its own work, and to decide which development, manufacturing and sales activities it can continue in the meantime.

Two things are worth keeping apart here: provisionally restricting the use of the materials in question, and halting development, manufacturing or sales. The first can be done at an early stage while evidence is preserved. The second is a matter to be decided according to how far the information has spread and how the situation is assessed in legal terms, and it is not automatically required simply because it has emerged that materials were brought in. The difficulty of this situation lies in having to meet two requirements at once: stopping use while leaving the evidence intact.

Where it is the company's own information that has been taken out, see the guide on where a departing employee is suspected of taking information and the guide on responding to the misuse of trade secrets by a competitor. Even within a single incident, the matters to be decided differ considerably.

Last updated: September 18, 2026

What to check first

Which materials were brought in, when, and by what route

Who viewed those materials, and with whom they were shared

Whether the contents are reflected in design documents, source code, test conditions, manufacturing conditions and the like

The employee's position at the former employer, their access rights, and their authority to take materials outside that company or to disclose them

The source of the materials as it was explained when they were received, and the point at which any doubts or warning became known

Written undertakings given on hiring, the work rules, and provisions on confidentiality

How we can helpIsolating the materials and preserving evidence / Investigating how far the information has spread / Deciding whether to continue, halt or resume development, manufacturing and sales / Interviewing the employee and employment measures / Replying to a warning from the former employer / Handling provisional disposition proceedings and litigation

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Contents

1. Isolating the materials and preserving evidence once the issue comes to light
2. Distinguishing knowledge at the time of acquisition from knowledge gained afterwards
3. Acquisition without knowledge or gross negligence, and the statutory exemption
4. Investigating how far the information has spread, and the presumption of use
5. Deciding whether to continue, halt or resume development, manufacturing and sales
6. Interviewing the employee and employment measures
7. Investigating and replying to a warning from the former employer
8. Defending provisional disposition proceedings and litigation, and protecting the company's own information
9. How we assist
Key legislation and official sources
Frequently asked questions

1. Isolating the materials and preserving evidence once the issue comes to light

One option is to identify the information under investigation not as a single block of "the former employer's materials", but item by item, according to its content, its version and where it is stored. The scope of the information the former employer later asserts and the scope of what the company actually received do not necessarily coincide.

For the materials that were brought in, one option is to preserve them in a state in which not only the content but also the date and time of receipt, the route by which they arrived, and the history of sharing can be checked. On that basis, they may be separated from the ordinary development and sales environment, with access limited to those conducting the investigation.

A point that requires care here is deleting the materials straight away. Deletion may look like the most straightforward response, but it can make it impossible to verify afterwards how the materials were acquired and how far they were used. If the former employer asks the company to explain its denial of use, the company may then be unable to show anything to support that denial. One option is to consider the method and timing of deletion or return together with the preservation of evidence.

The same applies to sharing information internally during the investigation. The need to let people know that materials were brought in is distinct from any need to show them the contents of those materials. One option is to limit both the recipients and what is shared with them.

Where the materials brought in contain personal information, the company checks whether its own acquisition and use of that information is lawful, separately from whether the information is a trade secret. Acquiring information while knowing, or being in a position to know without difficulty, that it was improperly obtained is given as an example of acquisition that is not proper. Where the information constitutes personal data, the company also checks whether the rules on provision to third parties apply, and whether the duties to confirm and record matters when receiving such a provision apply. The former employer's duties to report a leak and to notify the individuals concerned do not simply pass to the receiving company. At the same time, the company checks whether a situation requiring a report of a leak or similar incident has arisen at its own end, and, where it has, considers whether a report and notification of the individuals are required and when. For more detail, see the guide on responding to cyberattacks and information leaks.

2. Distinguishing knowledge at the time of acquisition from knowledge gained afterwards

As a starting point, whether the materials brought in amount to trade secrets is checked information by information. Information is not a trade secret merely because it came from the former employer. Three requirements apply: that the information is kept under control as a secret, that it is technical or business information useful for business activities, and that it is not publicly known.

The Unfair Competition Prevention Act divides the categories of conduct concerning trade secrets into those that turn on what was known at the time of acquisition and those that turn on what was learned after acquisition. For a company that has received such information, this distinction is the starting point for its response.

Acquiring a trade secret while knowing, or without knowing owing to gross negligence, that an act of wrongful acquisition was involved, and using or disclosing the trade secret so acquired

Acquiring a trade secret while knowing, or without knowing owing to gross negligence, that the disclosure is an act of wrongful disclosure or that an act of wrongful disclosure was involved, and using or disclosing it

Using or disclosing a trade secret already acquired, after coming to know, or failing through gross negligence to know, that an act of wrongful acquisition was involved

Using or disclosing a trade secret already acquired, after coming to know, or failing through gross negligence to know, that there was an act of wrongful disclosure or that such an act was involved

For the categories concerning wrongful acquisition and for those concerning wrongful disclosure alike, the categories come in pairs: one turning on knowledge at the time of acquisition, the other on knowledge gained afterwards. What a company does after receiving a warning from the former employer is mainly relevant to the categories that turn on knowledge gained after acquisition.

An act of wrongful disclosure of a trade secret here covers not only disclosure for the purpose of wrongful gain or of causing damage, but also disclosure in breach of a legal duty to maintain secrecy. The conclusion therefore does not follow from whether the new employee personally had such a purpose, and the company also checks the basis and the scope of the duty that the employee was under. That said, it does not follow that a breach of a confidentiality agreement automatically brings any and all information within this category.

The point in time at which the company's knowledge is assessed is also in issue. The time of acquisition and what was known may differ between the new employee, the person who received the materials, that person's manager and senior management. Rather than treating knowledge gained after acquisition as though it were knowledge at the time of acquisition, one option is to examine, from the contemporaneous materials and the sequence of events, what was known at the time of acquisition and whether there was gross negligence. Materials discovered later can also be evidence of the circumstances at the time of acquisition. The company's good faith and absence of gross negligence are also not assessed solely on the basis that senior management did not know; the duties and authority of the individuals involved in the acquisition and use are taken into account.

Where the company itself was involved in the wrongful acquisition, for instance by instructing the candidate during the recruitment process to take materials, an assessment is needed not only of the company's knowledge as a recipient but of its own act of acquisition.

3. Acquisition without knowledge or gross negligence, and the statutory exemption

The Unfair Competition Prevention Act provides an exemption for a person who acquires a trade secret through a transaction and who, at the time of acquisition, does not know that the disclosure is an act of wrongful disclosure, or that an act of wrongful acquisition or wrongful disclosure was involved, and is not grossly negligent in not knowing. What the exemption covers is the use or disclosure of the trade secret within the scope of the authority acquired through that transaction.

Conduct falling within the exemption is outside the provisions of that Act on injunctive relief and damages, and outside its penal provisions as well. The exemption is, however, confined to use or disclosure within the scope of the authority acquired through that transaction. Liability on bases outside that Act, such as breach of a contractual confidentiality obligation or copyright infringement, is considered separately.

Where the requirements of this provision are met, the exemption for use or disclosure within the scope of that authority is not understood to be lost merely because the person learned of the circumstances after acquisition. The three points to be checked individually are whether the acquisition was through a transaction, whether the person was without knowledge and without gross negligence at the time of acquisition, and how far the authority extends. If any of these is not established, the requirements of the categories turning on knowledge at the time of acquisition, and of those turning on knowledge gained afterwards, fall to be examined again.

As to the transaction that opens the door to this exemption, whether the receipt of materials on joining a company amounts to one is not settled by the existence of an employment contract alone. After checking the terms of any agreement on the provision and acquisition of information and the circumstances in which the materials came to be received, what has to be examined individually is whether the acquisition can be said to have been through a transaction, and what scope of authority to use or disclose was acquired through it. Good faith and the absence of gross negligence at the time of acquisition are checked separately from this. Adding the provision of information to the terms of an employment contract is not something that makes the exemption available.

4. Investigating how far the information has spread, and the presumption of use

In investigating how far the information has spread, one option is to check, in addition to where the materials themselves are stored, whether their contents are reflected in design documents, source code, test conditions, manufacturing conditions and the like. It is necessary to trace not only those who viewed the original materials, but also those who received the content through explanations, extracts or specifications, and where it went from there.

The Unfair Competition Prevention Act contains provisions under which use is presumed in certain cases. Where a person, after acquiring a trade secret, comes to know or fails through gross negligence to know that an act of wrongful acquisition was involved, and holds a technical secret record medium, another item in which a technical secret is embodied, or a sender identification code, as specified in that Act, and that person then carries out production or other conduct specified in that Act, the production or other conduct is presumed to have been carried out as unfair competition of the kind that turns on knowledge gained after acquisition. A corresponding provision applies to acts of wrongful disclosure.

This presumption is limited to technical secrets relating to production methods and to other information specified by Cabinet Order. The Cabinet Order specifies methods of evaluating or analyzing information, other than those falling within production methods. Production and other conduct here means the production of goods resulting from the use of the technical secret in question, and the provision of evaluation or analysis services as specified. It is not accurate to read this as meaning that use is presumed wherever materials are held. The presumption can be rebutted by evidence to the contrary.

These presumptions, which take holding as their premise, were added by an amendment that came into force on April 1, 2024. A transitional provision states that, where conduct amounting to the holding referred to there has continued since before that date, the new provisions do not apply even to production or other conduct carried out on or after that date. Rather than drawing the line solely by whether the materials were acquired before that date, the company checks when the conduct amounting to holding began and how it has continued. This point arises where materials brought in by an employee hired some time ago come to light later.

Where materials have been isolated in order to preserve evidence, that alone should not be treated as taking the situation outside the holding referred to in these presumptions. Who holds the materials and by what method, and the state of any production or other conduct, need to be taken into account.

5. Deciding whether to continue, halt or resume development, manufacturing and sales

One option for defining the scope of a provisional halt is to map the relationship between the information in question and each product, process and function, and then to consider separately which of the development, manufacturing and sales stages is to be covered.

In considering the effect on shipments, it should be borne in mind that transferring, delivering, displaying for the purpose of transfer or delivery, exporting, importing, or providing through a telecommunications line goods produced through the wrongful use of a technical trade secret is itself unfair competition. Conduct by a person who, at the time of taking transfer of the goods, did not know of those circumstances and was not grossly negligent in not knowing is excluded from this category. That is an exception for a person who takes transfer of the goods; it does not, on those conditions alone, rule out the liability of a company that received the trade secret and manufactured the goods itself.

The requirements to be checked also differ according to what the other side is asking for. An injunction to stop use or disclosure turns on infringement of business interests or a risk of such infringement; a claim for damages turns on intent or negligence, the occurrence of loss, and causation. This difference is also taken into account in deciding the scope of a halt.

Where manufacturing or delivery is to be halted, one option is to check contractual liability towards customers and to discuss the supply of substitutes and changes to delivery dates.

When resumption is under consideration, deleting the materials and rebuilding the work with a different team are often put forward. However, those steps alone do not necessarily support the conclusion that the information in question is not used in development or manufacturing after resumption. How far independence has been secured, and what becomes of liability that has already arisen, are considered separately. If work is resumed, one option is to record the source of the specifications and technical information used and the course of development, so that the effect can be verified later.

6. Interviewing the employee and employment measures

In interviewing the employee, the company checks the source of the materials, the access rights held at the former employer, how the materials came to be taken, and how they have been used within the company. Where personal devices or personal accounts are to be examined, one option is to check the authority to carry out the examination, the employee's consent and the effect on privacy, and to limit the examination to what is necessary.

Where the employee is to be temporarily removed from the work concerned, or placed on leave at home, the basis for that step as a provisional measure during the investigation, its necessity, its duration and the treatment of wages are each considered individually.

Where disciplinary action is under consideration, the company checks the basis for it in the work rules or elsewhere and whether those rules were made known, and then sets out the employee's account, whether the company gave instructions or acquiesced, and how the materials were actually used. Even where an employer is entitled to take disciplinary action against a worker, the action is void as an abuse of rights if, in light of the nature and manner of the worker's conduct and other circumstances, it lacks objectively reasonable grounds and is not considered appropriate under generally accepted social norms.

The fact that the company had rules prohibiting outside materials from being brought in, and had obtained a written undertaking, is a circumstance that helps explain the company's conduct. It does not of itself rule out the company's own liability for unfair competition, or its vicarious liability as an employer.

Criminal liability is assessed separately from civil unfair competition, by reference to the purpose, knowledge and other requirements laid down for each category of conduct. Gross negligence in civil terms, or a presumption of use, does not translate directly into the commission of an offense. Where a response to a criminal investigation becomes necessary, the company considers its approach to interviews and to producing materials, and whether the employee needs separate legal advice, bearing in mind that the interests of the company and of the employee may not coincide.

7. Investigating and replying to a warning from the former employer

Before replying to a warning, one option is to check what information the other side asserts to be a trade secret, which acts of acquisition, use or disclosure it takes issue with, and the scope of the measures it is asking for.

Receiving a warning is not the same as the other side's assertions being correct. That said, there are situations in which the content of the warning, and the material supporting it, affect the assessment of what the company knew after receipt and of gross negligence. The content and the timing of the reply are considered with this in mind.

Where the company asserts that it developed the material independently, or obtained it from a different source, one option is to show how that came about through design records predating the arrival of the materials, test results, publicly available materials, contracts relating to the acquisition and the like.

Where a reply is given while the investigation is still under way, one option is to state separately the facts that have been checked, the matters not yet checked and the provisional measures taken, and not to state non-use or complete deletion in respect of matters that have not been checked. Where a provisional agreement is proposed, one option is to identify the information covered, the operations covered, the period and the method of verification, and to make clear that the agreement is not an admission of liability and how it relates to any final resolution.

8. Defending provisional disposition proceedings and litigation, and protecting the company's own information

A provisional disposition is a Japanese court procedure for interim relief pending a decision on the merits. It is granted on a prima facie showing rather than on full proof, and it can be reviewed later in the main proceedings. Where the other side applies for a provisional remedy order, it must set out the right or legal relationship to be preserved and the necessity of preservation, and make a prima facie showing of each. In defending, one option is to structure the response so that arguments about whether the information is a trade secret and whether it has been used are kept separate from arguments about the scope and the urgency of the halt that is sought, and to show how the materials have been isolated and what the effect on the business would be.

An order provisionally determining the status of a party may not be issued without a date for oral argument, or a date for a hearing at which the respondent can attend. This does not apply where there are circumstances such that holding such a date would defeat the purpose of the application.

In litigation, where the other side asserts that its business interests have been infringed, or are at risk of infringement, by unfair competition, and identifies the specific manner of the goods or process said to constitute the infringing act, the receiving company must, if it denies that specific manner, clarify the specific manner of its own conduct. This does not apply where there are reasonable grounds for being unable to clarify it. This provision is relevant where the company relies on its own development history in answering the claim.

Where the company puts forward its own technical information as rebuttal evidence, it considers a protective order and restrictions on inspection of the case record by third parties, each according to its own requirements. A protective order is a Japanese court order that prohibits the persons named in it from using the trade secret for purposes other than the conduct of the proceedings, and from disclosing it to anyone else. There is a proviso: where, by the time of the application, a party or another person concerned had already acquired or held the trade secret by means other than reading the briefs or examining the evidence, that person falls outside the order. In cases involving materials brought in from a former employer, this point can be in issue.

This exception is decided separately for each person to whom an order would apply, by asking whether that person had already acquired or held the trade secret concerned. The fact that one person involved held the materials does not mean that orders against the others are all ruled out. The former employer's information that was brought in, and the company's own technical information put forward in rebuttal, are considered separately.

Before producing the company's own confidential information, one option is to consider the scope of the information to be produced, and whether and when to apply for a protective order or for restrictions on inspection. Obtaining a protective order and restricting inspection of the case record by third parties are separate procedures.

9. How we assist

We set out an approach to isolating the materials and preserving evidence, and we consider the method and timing of deletion or return

We design the investigation into how far the information has spread, and set out in chronological order what was known at the time of acquisition and afterwards

We develop an approach to continuing, halting and resuming development, manufacturing and sales that takes account of both the legal assessment and the needs of the business

We assist with interviews of the employee, with employment measures, and with the consideration of disciplinary action

We prepare replies to warnings from the former employer, conduct negotiations, and act as counsel in provisional disposition proceedings and litigation

Key legislation and official sources

English translations of legislation are provided for reference. The Japanese texts are authoritative.

Where it appears	Legislation	Source type
Requirements for trade secrets; categories of unfair competition concerning trade secrets; exemption for acquisition through a transaction; presumption of use; goods produced through wrongful use; injunctive relief and damages; duty to clarify the specific manner of conduct; protective orders; penal provisions	Unfair Competition Prevention Act（不正競争防止法）	Japanese legislation
Information specified by Cabinet Order for the presumption of use, and the scope of production and other conduct	Order for Enforcement of the Unfair Competition Prevention Act（不正競争防止法施行令）	Japanese legislation
Lawfulness of the company's own acquisition and use of personal information; rules on provision to third parties and on confirmation and recording; reporting of leaks and notification of individuals	Act on the Protection of Personal Information（個人情報の保護に関する法律）	Japanese legislation
Disciplinary action that is void as an abuse of rights	Labor Contracts Act（労働契約法）	Japanese legislation
Vicarious liability of an employer	Civil Code（民法）	Japanese legislation
Provisional remedy orders, the prima facie showing required, hearing dates for orders provisionally determining a party's status, objections, and stay of execution	Civil Provisional Remedies Act（民事保全法）	Japanese legislation
Restriction of inspection of the case record by third parties	Code of Civil Procedure（民事訴訟法）	Japanese legislation
Copyright in materials that are not trade secrets	Copyright Act（著作権法）	Japanese legislation

Legal information reviewed: 2026-09-18

Frequently asked questions

Can the employee not even use the knowledge and experience gained in a previous job?

General skills and experience need to be considered separately from the former employer's trade secrets. That said, information does not necessarily fall outside the protection given to trade secrets merely because it is information the person remembers. The assessment takes into account the content of the information and how specific it is, together with how it was managed at the former employer and whether it is publicly known.

We prohibited materials from being brought in and took a written undertaking. Is the company relieved of liability?

Rules and undertakings of that kind are a circumstance that helps explain the company's conduct. They do not of themselves rule out the receiving company's own liability for unfair competition, or its vicarious liability as an employer. What matters is how the materials were actually handled in the course of the company's business.

Without the former employer's permission, is the exemption for acquisition without knowledge or gross negligence unavailable?

Rather than denying the exemption on the sole ground that no permission was given, what falls to be examined is whether the acquisition can be said to have been through a transaction, whether the company was without knowledge and without gross negligence at the time of acquisition, and how far the authority acquired through that transaction extends. For materials received in connection with recruitment, the assessment of these three points is particularly in issue.

If the materials are not trade secrets, are we free to use them?

Even where the materials are not trade secrets, copying or altering them may amount to copyright infringement. As to contractual obligations, the confidentiality obligation the employee owes to the former employer and any obligation the company itself owes need to be checked separately. Obligations under a contract to which the employee is a party do not, as such, become contractual obligations of the receiving company. That said, liability where the company was involved in the employee's breach of an obligation may arise separately. Whether the information is a trade secret does not by itself settle the question.

A provisional disposition order has been issued. If we file an objection, can we resume the business?

An objection to the provisional remedy order may be filed with the court that issued it, but filing an objection does not of itself stay execution of the order. To obtain a stay of execution while the objection is being heard, a separate application is required, supported by a prima facie showing both of circumstances that clearly constitute grounds for revoking the order and of a risk of loss that cannot be compensated if execution proceeds. The court may order a stay of execution or similar measures, requiring security to be provided or on condition that security is provided. A stay does not follow automatically from asserting the requirements, and the burden of providing security is taken into account as well. The approach is decided in light of the effect on the business.

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