Trade Secret Protection Act | Claim for 600 Million Won in Damages by a Business Partner That Diverted Trade Secrets, Claim Dismissed

To provide a defense strategy best suited to the situation, Daeryun Law Firm set out to understand the case through a thorough consultation.

The client's company is a manufacturer that makes products such as industrial glass, and the business partner (hereinafter the plaintiff) is a wholesale and retail seller.

The plaintiff entered into a dealership contract with the client and had done business for a long time.

At one point, the client's company discovered that the plaintiff had established a manufacturer in the same industry and had taken the company's proprietary technology.

In response, the client's company gave notice of contract termination to the plaintiff, which had taken its trade secrets, and stopped supplying its products.

The plaintiff claimed that the taking of trade secrets was entirely untrue, asserted that it had been unilaterally refused the contract, and filed a claim for damages of about 600 million won.

🔗A trade secret refers to technical or managerial information that is not disclosed to the public and is confidentially managed within a company, such as production methods, sales strategies, or other information useful for business operations.

We will explain the representative types of information that can be protected as trade secrets.

-Technical information
Product and facility design drawings, product manufacturing methods, raw material formulation information, test data, and the like

-Managerial information
Customer lists, key plans, management information, manuals, and the like

For information to qualify as a trade secret, it must be not publicly known, hold technical or managerial value, and be managed as confidential.

If a person infringes a trade secret, the person may be punished by imprisonment for not more than 10 years or a fine not exceeding 500 million won.

If an amount equal to 10 times the financial gain from the infringing act exceeds 500 million won, a fine of not less than twice and not more than 10 times that financial gain may be imposed, and aggravated punishment applies in the case of disclosure abroad.

The attorney in charge argued that the fault for the refusal of dealings lay with the plaintiff.

The plaintiff secretly established Company A without the client's knowledge and then planted Outsider 1 in the client's company under false pretenses in order to extract the client company's manufacturing process.

Outsider 1 took up disguised employment in the R&D team of the client's company while concealing the fact of having co-founded the plaintiff's Company A.

Afterward, Outsider 1 stated that he wished to learn not only his original assigned duties but also techniques such as raw material formulation and analysis, and diverted all trade secret materials related to them.

The special glass manufacturing process of the client's company cannot be used to develop, manufacture, and produce products in a short period without specific knowledge of that technology.

The plaintiff's Company A manufactured and sold the glass in question only three months after establishing its factory.

The Daeryun attorney in charge argued that trust had been broken by acts such as the disguised employment and explained the reasons why the client's company had no choice but to stop dealing with the plaintiff.

The client's company has filed a criminal complaint against the plaintiff for offenses such as disclosure of trade secrets, and criminal proceedings are currently in progress.

The attorney in charge argued that the plaintiff's claim for damages was without merit and requested that the claim be dismissed.