“It’s a technology we created together…” Is betrayal legal? [Daeryun’s Biz law forum]

If the jointly developed technology was used alone,
Is 'trade secret infringement' recognized through lawsuit?
Pay attention to the Supreme Court ruling that “it is not illegal”
The parties' intentions must be clear from the start of the contract.

Companies often develop technologies jointly with other companies. A representative example is when a large company develops production technology for specific parts to be supplied together with primary and secondary suppliers. Suppliers maintain amicable relationships with large companies until technology development is completed and expect to share profits after delivery. However, in reality, unexpected problems always arise.

Examples include cases where the primary supplier stops collaborating with the secondary supplier towards the completion of development and makes the final delivery to a large corporation alone or together with a new secondary supplier, or conversely, where the secondary supplier skips the primary supplier and makes the final delivery directly to the large corporation alone. Although a significant amount of money and effort was invested in technology development, the company was unable to produce and sell the product, so the technology was stolen.

In this case, if the victim company files a 'trade secret infringement lawsuit' against the offending company, can it win? Shouldn’t they at least charge a fee for using the technology? From a technician's point of view, 'my technology', which should naturally be protected, has been stolen. Can it be protected by the court?

Is it possible to use it unilaterally without the consent of the other party?

Which company owns a trade secret jointly developed by two or more companies? What is the scope of each co-developer's use? The technology belongs jointly to the developers, but unless there is a separate contract, the court ruled that in principle, one co-developer can freely use the entire technology without the consent of the other developers (Supreme Court 2024. 11. 20, decision 2021Da278931, 278948).

Let’s substitute it into the above example. The conclusion is that even if a large company's primary and secondary suppliers jointly developed trade secret technology and parts, and one party betrays the other party and independently uses the trade secret to produce the parts and then supplies them to the large company, it is not a trade secret infringement. This is an incomprehensible ruling from the perspective of researchers and developers. Why did the court make this decision?

At first glance, it is a natural judgment that jointly developed results are jointly owned. The problem is that ‘joint ownership’ is not directly related to the ‘scope of use for each developer.’ Let's take objects as an example. Article 257 of the Civil Code distinguishes the forms of 'joint ownership' into 'joint ownership', 'joint ownership', and 'common ownership'. In cases where 'movable property and movable property match' and become a composite product, 'when it is impossible to distinguish between the master and the species of the matching movable property', it is stipulated that 'the composite product is shared.' Therefore, if A and B create a composite by combining the items they each owned, the composite becomes shared between A and B according to the above provisions.

Reasons why it is difficult to apply the logic of civil law and patent law

A and B, who share a composite, can use and profit from the entire composite in proportion to their shares, unless there are other circumstances in accordance with the sharing-related provisions of the Civil Act (Articles 262 to 270 of the Civil Act). This means that if A and B each have a half stake in the above composite, A and B will each be able to use and profit from it at a half ratio.

If you apply this civil law logic to trade secrets, the story is different. This is because in the case of goods, B cannot use and profit at the same time while A is using and profiting, but in the case of technology, it is different. While A is using the technology, B can also use it at the same time. If the sharing provisions of the Civil Code are applied to the technology shared by A and B, the technology must be shared according to the shares held by A and B, but this conclusion is somewhat unnatural.

For this issue, you can refer to how to use 'shared patents'. Our Patent Act stipulates in Article 99, Paragraph 3, ‘If a patent right is shared in common, each co-owner may implement the patented invention on his/her own without obtaining the consent of the other co-owners, except in cases where it is specifically agreed upon in a contract.’ If a researcher keeps the technology secret, it becomes a 'trade secret', and if he discloses it and registers it as a property right, it becomes a 'patent (or utility model) technology'. Therefore, the objects of trade secret technology and patented technology are similar in many ways. Therefore, the two can be understood in the same context. Then, if a jointly developed technology is viewed as 'sharing', we can come to the conclusion that each sharer can freely use the technology without the consent of other sharers.

However, it is worth noting again that the above ruling does not explicitly determine that “jointly developed research results are shared.” This is because the court had intention in using the expression ‘joint ownership’ rather than sharing. Therefore, from the expression 'joint ownership', we cannot hastily conclude that "our court viewed the results of joint research and development as sharing and determined that each sharer can use the results at will by applying the sharing provisions of the Patent Act." It is my personal opinion, but our patent law and the sharing provisions of patent rights are a reference to Japan's patent law. The problem is that unlike our civil law, the Japanese civil law does not divide the forms of 'joint ownership' into 'sharing', 'joint ownership', and 'general ownership'. In the end, mechanically substituting the ‘patent sharing’ provisions of our patent law into the ‘sharing’ provisions of our civil law is an issue that requires further consideration.

The Supreme Court sees it differently between ‘protection of interests’ and ‘regulation of infringement.’

So, for what reason did the court decide that “co-developers can freely use jointly owned technology without the consent of other developers”? The court judged the above issue from the perspective of ‘regulation of actors (infringers)’ rather than protection of rights holders. This can be understood in the same context as the Constitutional Court's decision in the past, saying, "Because the Unfair Competition Prevention Act individually and specifically regulates well-known, that is, acts that are likely to cause confusion with widely known signs, it is problematic to limit the scope of regulation rather than the scope of protection" (Constitutional Court, September 27, 2001, see Hunba 77).

According to the previous Supreme Court decision, "Even if several people jointly hold a trade secret, if one of the holders who has an obligation to keep the trade secret as a secret to the other holder due to a contractual relationship, etc., uses or discloses the trade secret for the purpose of obtaining an unfair profit or causing damage to the other holder, an act of infringement of trade secrets in item (d) may be established in the relationship with the other holder. (Omitted) Plaintiff and defendant use method and use of the technical information in this case, which is a trade secret jointly held by the defendant, etc. Since there was no separate agreement regarding restrictions on use, it cannot be said that the defendant must use the technical information in this case only for the production of products supplied to the plaintiff or that it has an obligation to use it with the plaintiff's consent” (Supreme Court decision above). In the end, the court judged not ‘whose rights should be protected?’ but ‘Is the behavior in question subject to regulation?’

Regarding the above ruling, you may be thinking, “Aren’t protecting the interests of rights holders and regulating the actions of infringers ultimately the same thing?” However, considering that commonly used joint research and development contracts often simply state “research results will be shared,” and even that in many cases, it is judged to be very important to distinguish between protecting the interests of the rights holder and regulating the actions of the infringer. Based on the information explained above, it can be concluded that if the contract states that “the results of joint development are shared” or does not even write that, there is a very high possibility that legal disputes unintentional by the developer will arise in the future. Not many researchers and developers would be aware that by signing a contract that states, "jointly developed technology is shared," they are agreeing to the clause that "the other party may freely use the jointly developed technology without permission."

In order to use and profit from the results in accordance with the intent at the time of first signing the joint development contract, a clear contract that matches the parties' wishes must be entered into first. The assistance of legal experts is also essential to prevent disputes from occurring.

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"It's a technology we created together..." Is betrayal legal? [Daeryun’s Biz law forum] (Shortcut)