CONTENTS
- 1. Unfair Competition Prevention and Trade Secret Protection Act | Overview of the Case
- - The Lower Court's Determination
- 2. Unfair Competition Prevention and Trade Secret Protection Act | The Supreme Court's Determination
- - The Criteria for Determining a Trade Secret as Viewed by the Supreme Court
- 3. Unfair Competition Prevention and Trade Secret Protection Act | Scope of Application and Structure for Establishing Illegality
- - The Court's Criteria for the Attribution of Liability
- 4. Unfair Competition Prevention and Trade Secret Protection Act | Implications of the Judgment
- - Daeryun's Assistance
1. Unfair Competition Prevention and Trade Secret Protection Act | Overview of the Case
In this case, in which a violation of the Unfair Competition Prevention and Trade Secret Protection Act was at issue, executives and employees of an SK Hynix supplier were indicted on charges of providing core technology and equipment drawings related to semiconductor manufacturing processes to an overseas competitor.
The investigation found that the defendants had enabled semiconductor cleaning recipes, HKMG (High-K Metal Gate) process technology, and drawings of advanced cleaning equipment, all acquired during their collaboration, to be used in the equipment development of a Chinese semiconductor company.
The technology at issue was not mere reference material but core process information directly tied to semiconductor performance, which had not been disclosed externally and was technical data subject to strict internal management within the company.
Accordingly, not only the individual defendants but also the supplier corporation, which had obtained a benefit from the offense, were indicted together under the joint penalty provision.
The Lower Court's Determination
The appellate court found some of the defendants guilty.
In particular, it determined that the mere circumstance that the technology had been jointly developed by SK Hynix and the supplier did not make it possible to conclude that the technology could be freely transferred to the outside.
The court held that, focusing on the actual managing party and the state of secrecy management rather than the formal attribution of the technology, the technology at issue constituted a trade secret under the Unfair Competition Prevention and Trade Secret Protection Act.
Accordingly, A, the supplier's vice president, who had been sentenced to one year's imprisonment at the first instance, was given an actual custodial sentence of one year and six months' imprisonment, and many executives and employees were also sentenced to actual custodial terms or suspended sentences (a suspended sentence under Korean law, broadly comparable to a suspended sentence or probation in common-law systems, under which the conviction loses its effect once the suspension period passes without incident).
In addition, the fine imposed on the corporation was raised from KRW 400 million at the first instance to KRW 1 billion on appeal.
This was because the appellate court reassessed certain acts of leaking equipment specifications, which had been found not guilty at the first instance, as trade secrets and advanced industrial technology.
2. Unfair Competition Prevention and Trade Secret Protection Act | The Supreme Court's Determination
The defendants and the prosecutor appealed against the lower judgment, but the Supreme Court found no misapprehension of the legal principles in the lower court's determination and dismissed all of the final appeals.
The Supreme Court made the following points clear.
- The technology at issue satisfied the requirements of being non-public, having economic value, and being subject to secrecy management, and therefore constituted a trade secret.
- Even technology that was jointly developed may be subject to protection, depending on the contractual and management framework.
- Even where the offense is committed by an individual executive or employee, the corporation is also subject to punishment when the offense is combined with the company's interest.
Accordingly, the Supreme Court finally confirmed the terms of imprisonment for the individual defendants and the fine of KRW 1 billion for the corporation, holding that the lower court's determination contained no error of violating the rules of logic and experience or of misapprehending the legal principles on trade secrets under the Unfair Competition Prevention and Trade Secret Protection Act.
The Criteria for Determining a Trade Secret as Viewed by the Supreme Court
In this judgment, the Supreme Court did not determine whether the information constituted a trade secret on a formal basis.
The court took as its core criteria the actual industrial value and the potential to provide a competitive advantage, rather than the name of the technology or the entity that developed it.
Factor | The Supreme Court's Criterion |
Non-public nature | Whether the information has not been disclosed externally |
Economic value | Whether it makes a substantial contribution to securing competitiveness |
Secrecy management | Whether a system of access restriction and management exists |
In particular, the court made clear that even where only part of the technology was provided or only part of a drawing or recipe was used, illegality may be recognized if the conduct ultimately contributed to the competitor's technological development.
3. Unfair Competition Prevention and Trade Secret Protection Act | Scope of Application and Structure for Establishing Illegality
This judgment is not a determination limited to the semiconductor industry but a case that presents a general legal principle based on the character of a trade secret and the danger of conduct transferring it abroad.
The Supreme Court determined the matter by focusing not on the size of the company or its line of business, but on whether the information at issue provides a competitive advantage and whether it was being managed and controlled internally.
In addition, the court held that, although a violation of the Unfair Competition Prevention and Trade Secret Protection Act is not automatically established by the mere fact that technology was provided, illegality may be recognized where conduct that is formally limited, such as providing part of the technology, explaining the design direction, or sharing a process concept, in substance contributed to the competitor's technological development.
In particular, the court made clear that whether a non-disclosure agreement was concluded, industry practice, and whether a superior gave instructions cannot be grounds that necessarily preclude illegality.
The Court's Criteria for the Attribution of Liability
This case is not limited to the deviant conduct of a particular individual, and it shows that liability may expand in stages according to the degree of involvement.
A representative is assessed on the basis of organization-wide management and supervisory responsibility and the decision-making structure, while for an executive, whether the executive approved or aided the technology transfer becomes the key issue.
Even in the case of working-level staff, liability is not exempted, and whether they could have been aware of the character of the technology and the possibility of its external transfer becomes an important factor in the determination.
Category | Criterion for Determining Liability |
Representative | Management and supervisory responsibility and organizational involvement |
Executive | Whether there was approval, aiding, or tacit acceptance |
Working-level staff | Possibility of awareness and the scope of execution |
Corporation | Combination of the individual offense and the company's interest |
4. Unfair Competition Prevention and Trade Secret Protection Act | Implications of the Judgment
This judgment offers important implications not only for the semiconductor industry but for technology-intensive industries as a whole, including IT, manufacturing, and bio.
First, a shift in perception regarding jointly developed technology is needed.
Even technology that was jointly developed may be protected as a trade secret, depending on the contractual and management structure.
Second, the judgment of an individual executive or employee may expand into a risk for the entire company.
Even where the party providing the technology is an individual, this may lead to punishment of the corporation when it is combined with the company's interest.
Third, the absence of advance management leads directly to criminal liability.
Where access controls over technical data, procedures for external provision, and a framework for reviewing overseas transactions are inadequate, it is difficult to avoid liability through after-the-fact explanation alone.
Category | Points for Companies to Note |
Technology management | Documenting the trade secret management system |
Personnel management | Access control over former and current executives and employees |
Overseas transactions | Legal review before transfer abroad |
Corporate risk | Building a framework to address the joint penalty provision |
This judgment shows that the leakage of technology may lead to an actual custodial sentence for an individual and the imposition of a large fine on a corporation.
If there is a possibility that a violation of the Unfair Competition Prevention and Trade Secret Protection Act may be at issue, legal review and response should take place not after the incident occurs but from the stage before an investigation begins.
Daeryun's Assistance
In cases of this kind, the key is to reconstruct, on legal principles, whether the technology constitutes a trade secret, and to control the scope of materials submitted and the direction of statements so as to block the unnecessary expansion of liability.
In addition, a comprehensive response strategy should be pursued in parallel, one that separates the liability structures of the individual and the corporation and that considers not only the criminal proceedings but also derivative administrative and civil risks.
Area of Response | Main Content |
Technology review | Analysis of whether the matter constitutes a trade secret or protected subject matter |
Investigation response | Establishing a strategy for statements and the submission of materials |
Criminal defense | Narrowing the scope of liability |
Corporate response | Management of the joint penalty provision and subsequent risks |
Daeryun Law Firm LLP provides assistance that goes beyond the defense of an individual case, managing legal risks structurally from the perspective of the national interest and the protection of national technology, and working to ensure that legitimate research, development, and industrial activity are not unduly constrained.
Beyond that, its work is not confined to responding after a dispute arises; it provides prevention-focused legal advice aimed at blocking the risk of trade secret infringement in advance.
Specifically, it reviews in advance whether technology or data constitutes a trade secret and assists in systematically building a secrecy management framework through the management of access rights, the revision of internal rules, and the improvement of contractual structures.
In addition, it reviews the overall structure of supplier, outsourcing, and overseas transaction arrangements so that legal risks that may arise during the technology transfer process can be identified and managed proactively.
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