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Industrial espionage growing rapidly

Publication Date : 16-01-2014


A former Nippon Steel & Sumitomo Metal Corp. employee who allegedly sold technology developed by the firm to South Korean steelmaker Posco is now suspected of having tried to sell cutting-edge technology belonging to the firm to a Chinese company as well, it has been learned during the court process over the Posco case.

For Japanese manufacturers, industrial espionage, in which information about advanced technologies is sold to overseas rivals, has become an increasingly common threat. However, measures to protect the industrial technology developed by Japanese firms are proving difficult to create.

In April 2012, Nippon Steel & Sumitomo Metal, then Nippon Steel Corp., filed a civil lawsuit with the Tokyo District Court against Posco, claiming the South Korean company stole technology by persuading former Nippon Steel employees to illegally pass on the Japanese firm’s technology for manufacturing “grain-oriented electrical steel sheets” to Posco in return for huge rewards. Nippon Steel demanded 98.6 billion yen (US$944 million) in compensation for damages and an injunction to stop the manufacture and sale of products using the technology based on the Unfair Competition Prevention Law.

The allegation came to light in 2007, when a former Posco employee, who was arrested over an allegation of industrial espionage, reportedly admitted having sold Nippon Steel technology to a rival firm.


In the lawsuit against Posco, Nippon Steel & Sumitomo Metal submitted data on two e-mails as evidence to the court. According to the e-mails, after retiring from the Japanese company, the former employee, a defendant in the lawsuit, allegedly approached another former employee in 2008 via e-mail with an offer to sell manufacturing technology belonging to the firm to the major Chinese steelmaker Wuhan Iron and Steel (Group) Corp. for more than 200 million yen in total. The defendant is believed to have learned the technology in question while he was still employed. The former employee who had been approached allegedly gave technical guidance to the Chinese firm.

In one of the e-mails, the defendant said they would provide a five-day technical guidance course to the Chinese firm in return for 50 million yen, and would be able to receive another 50 million yen if the technology they provided was then used by the firm. Furthermore, they would give technical guidance to the firm for 1 million yen per month after manufacturing equipment was constructed and would receive up to 100 million yen if the Chinese firm could commercialise the technology. In the second e-mail, the defendant apparently was aware of the illegality of these actions, saying, “I think this would certainly be a crime if it came to light.”

The former employee who had been approached admitted he had received these e-mails.

“I cut off the exchange [with the defendant] because there was talk of money right from the start,” he told The Yomiuri Shimbun. He also explained there was no negotiation with the Chinese steelmaker, saying, “We stopped talking about the issue, so there has been no progress.”

The defendant refused an interview with The Yomiuri Shimbun, saying, “I don’t want to talk [about the issue].” Therefore, it is not clear whether the technology in question has actually been leaked to the Chinese firm.

Tip of the iceberg

Through the lawsuit, it has become evident that Nippon Steel & Sumitomo Metal’s corporate secrets had been leaked to Posco.

The South Korean company has submitted to the court a written statement in which it admitted it had received technical data designated as “trade secrets” of the Japanese firm from the Japanese company’s former employees. Posco has been arguing that it developed the manufacturing technology on its own, but Nippon Steel & Sumitomo Metal insisted it was unnatural for the South Korean firm to take only five years to put into practical use technology that took the Japanese company 26 years to develop.

Many observers, meanwhile, say the case is merely the tip of the iceberg. According to sources close to a major law firm, a number of firms have asked for advice regarding dubious cases, such as senior engineers suddenly retiring without giving clear reasons.

US$1 = 104 yen


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