CONTENTS
- 1. Unfair Competition Prevention and Trade Secret Protection Act | Concept
- - Purpose of Enacting the Unfair Competition Prevention and Trade Secret Protection Act
- - Reasons Companies Must Comply with the Unfair Competition Prevention and Trade Secret Protection Act
- 2. Unfair Competition Prevention and Trade Secret Protection Act | Types and Levels of Punishment
- - Expansion of the Scope of Protection
- - Remedies Available to the Right Holder
- 3. Unfair Competition Prevention and Trade Secret Protection Act | Prevention and Response Strategies for Companies
- - Practical Checklist
1. Unfair Competition Prevention and Trade Secret Protection Act | Concept
The Unfair Competition Prevention and Trade Secret Protection Act was enacted to maintain fair competition among companies operating in the same line of business and to protect the rights and interests of consumers.
Where a company restricts competition with another company by unfair means or causes harm to another company, it may become subject to sanctions under the Unfair Competition Prevention and Trade Secret Protection Act.
The Unfair Competition Prevention and Trade Secret Protection Act provides that a claim for damages may be brought in respect of, among other things, conduct that unfairly restricts another company's participation in competitive activity, and conduct that, for one's own business and in a manner contrary to fair commercial practices or competitive order, makes unauthorized use of the fruits produced by another's substantial investment or effort.
If a complaint or report is filed on the basis of this Unfair Competition Prevention and Trade Secret Protection Act, one must respond immediately in order to defend against punishment and a claim for damages.
As the process of securing objective evidence that can support one's assertions in relation to an act of unfair competition is important, one should obtain the assistance of a specialist attorney who combines experience in handling cases under the Unfair Competition Prevention and Trade Secret Protection Act with specialized knowledge.
It is also a good approach to seek legal advisory on the optimal means of resolution so that the matter may be settled through negotiation or arbitration with the other party.
Purpose of Enacting the Unfair Competition Prevention and Trade Secret Protection Act
The purposes for which the Unfair Competition Prevention and Trade Secret Protection Act was enacted are as follows.
Protecting companies from imitation and misappropriation
Protecting intangible assets such as trade secrets and ideas
Encouraging the protection of new technology and creativity
Reasons Companies Must Comply with the Unfair Competition Prevention and Trade Secret Protection Act
1. Maintaining corporate value through the protection of intangible assets
Today, a company's competitiveness depends heavily on intangible assets such as patents, designs, trade secrets, and brand recognition.
The Unfair Competition Prevention and Trade Secret Protection Act prevents these assets from being imitated, misappropriated, or infringed by other companies.
If a company's internal technology, customer information, business strategy, and the like were not legally protected, competitors could easily imitate them and impede the company's growth.
Compliance with the Unfair Competition Prevention and Trade Secret Protection Act is thus both a defense of assets and a strategy for the company's survival.
2. Securing a fair competitive order
The Unfair Competition Prevention and Trade Secret Protection Act protects a fair market competitive order.
If a company violates the law, its relationship with competitors becomes unfair, which can lead to a decline in its market reputation and, further, to the loss of business partners.
In particular, in the subcontracting, distribution, and franchise industries, compliance with the Unfair Competition Prevention and Trade Secret Protection Act is important alongside the Monopoly Regulation and Fair Trade Act, and reports or litigation arising from unfair transactions are frequent.
3. Preventing civil and criminal liability and financial loss
A violation of the Unfair Competition Prevention and Trade Secret Protection Act is accompanied by various legal sanctions, including criminal punishment, damages, provisional injunctions, and corrective orders.
In practice, conduct such as leaking a competitor's trade secret or imitating the external appearance of a product can lead to consequences such as damages running into hundreds of millions of won or a prohibition on the use of a brand.
Familiarizing oneself with the relevant legislation in advance and putting preventive measures in place has a decisive effect on cost savings and risk avoidance over the long term.
4. Establishing an organizational culture and an internal ethics-management framework
An internal system for complying with the Unfair Competition Prevention and Trade Secret Protection Act is directly linked to strengthening a company's ethical management and compliance management systems.
For example, establishing an employee-invention compensation system, a trade secret management guideline, and an internal whistleblowing system leads, together with legal compliance, to securing employees' trust and to a culture of preventing leaks.
Ultimately, it leads toward reducing risk and protecting the corporate brand.
2. Unfair Competition Prevention and Trade Secret Protection Act | Types and Levels of Punishment
Violations of the Unfair Competition Prevention and Trade Secret Protection Act fall into acts of unfair competition and acts of trade secret infringement.
Each type, and the corresponding level of punishment, is as follows.
| Conduct | Type | Level of Punishment |
| Act of unfair competition | Using a mark identical or similar to another's name, trade name, trademark, product container or packaging, or other mark indicating that goods are another's goods, or selling, distributing, importing, or exporting goods bearing such a mark, so as to cause confusion with another's goods | Imprisonment for not more than 3 years or a fine of not more than KRW 30 million |
| Using a mark identical or similar to another's name, trade name, emblem, or other mark indicating another's business, so as to cause confusion with another's business facilities or activities | ||
| Conduct that harms another's reputation or mark, and indicating a false place of origin on goods or in advertising | ||
| Act of trade secret infringement | Acquiring or using a trade secret, or disclosing it to a third party | Imprisonment for not more than 10 years or a fine of not more than KRW 500 million |
| Removing a trade secret beyond a designated location without authorization | ||
| Continuing to hold a trade secret despite a request from the trade secret holder to delete or return it | ||
| Acquiring a trade secret by theft, deceit, intimidation, or other wrongful means |
Expansion of the Scope of Protection
The Unfair Competition Prevention and Trade Secret Protection Act was initially operated with a focus on preventing confusion as to trademarks, trade names, and product appearance, but it now extends its protection broadly to trade secrets, ideas, technical materials, internet domains, the diversion of human resources, software UI, and online content.
In particular, new-technology information and user interfaces are now also included within the scope of protection of the Unfair Competition Prevention and Trade Secret Protection Act.
Remedies Available to the Right Holder
Where an act of unfair competition occurs, the injured party may avail itself of the following legal remedies.
▶Claim for prohibition and prevention : The party may petition the court to order the cessation of the act in question and the prevention of any such act in the future.
▶Claim for damages : Where loss has been caused intentionally or negligently, the party may seek monetary compensation through civil litigation.
▶Claim for measures to restore reputation : The party may request the publication of a statement or an apology in order to restore the goodwill impaired by false statements or unfair competition.
▶Application for a provisional injunction : Where urgent measures are required before litigation, the party may apply to the court for a provisional injunctive order.
3. Unfair Competition Prevention and Trade Secret Protection Act | Prevention and Response Strategies for Companies
Numerous legal disputes arise in connection with acts of unfair competition in violation of the Unfair Competition Prevention and Trade Secret Protection Act.
In connection with acts of unfair competition, Daeryun reviews its clients' cases with extensive experience and expertise in matters such as representation in filing complaints and defense against punishment, and proposes suitable solutions.
In particular, the National Assembly has broadened the scope of damages so that, where a patent right or the like is infringed intentionally, damages of up to five times the actual loss may be awarded.
Accordingly, if you have suffered or committed an act of unfair competition, it is advisable to find a firm capable of collaborating with a civil litigation specialist attorney and to formulate a response strategy.
The strategies this firm proposes for preventing and responding to legal disputes relating to the Unfair Competition Prevention and Trade Secret Protection Act, for companies, are as follows.
1. Securing intellectual property rights in advance
Check the similarity of brand identity elements such as product names, packaging, and logos
2. Establishing a trade secret management system
Prepare a ‘trade secret management guideline’ and conduct regular training for practitioners
3. Systematizing contracts and protecting ideas
Secure NDAs (non-disclosure agreements) and clauses prohibiting technology misappropriation
4. Monitoring competitors
Where necessary, prepare a legal response and send a cease-and-desist letter
Practical Checklist
Item | Confirmed |
|---|---|
Confirm whether any competitor product or mark similar to the company's own brand exists | ☐ |
Whether an NDA is executed for all external transactions | ☐ |
Conducting design and trademark searches and reviewing registration when developing new products | ☐ |
Whether trade secret training is provided to employees and business partners | ☐ |
Documenting technical materials and limiting the scope of disclosure when providing them | ☐ |
Establishing internal response guidelines for acts of unfair competition | ☐ |
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