An amendment to the Industrial Technology Protection Act (the “ITA Amendment”) was promulgated recently on August 20, 2019, which will take effect in six months thereafter on February 21, 2020. The ITA Amendment is legislation essentially reflecting the Korean government’s “Plans to Combat/Prevent Leakage of Industrial Technologies” announced on January 3, 2019 and is noteworthy in the midst of the ongoing global trade war.
The most notable changes introduced by the ITA Amendment may be summarized briefly as follows: (i) expanded protection and regulation of industrial technologies; (ii) strengthened sanction for infringement on industrial technologies and remedies therefore; and (iii) protective measures to prevent leakage of industrial technologies during judicial proceedings. Discussed below are the specific changes of the ITA Amendment related to the above changes.
1. Expanded obligation on the head of companies that possess/manage National Core Technologies (Article 10(1))
Companies that possess/manage the so-called “National Core Technologies” will be required to have their technical personnel with access to such technologies enter into an agreement designed to limit/manage their departure (to join another company) and to maintain confidentiality of those technologies. Not complying with this obligation, the company could be subject to an administrative fine of KRW 10 million or less (about USD 8,500 at current exchange rate).
2. Strengthened regulation on merger and acquisition by foreign companies of domestic companies with National Core Technologies (Article 11-2)
| Classification | Before ITA Amendment | After ITA Amendment |
| Companies with National Core Technologies developed with R&D funding from the Korean government | Subject to prior reporting | Subject to prior approval |
| Companies with National Core Technologies developed without R&D funding from the Korean government | No applicable regulation | Subject to prior reporting |
The ministry empowered to administer/enforce the prior reporting/approval requirement for M&As involving companies with National Core Technologies is the Ministry of Trade, Industry, and Energy (“MOTIE”); and MOTIE can issue a corrective order to suspend, prohibit, and/or restore the M&A transaction if the prior reporting/approval requirement is not complied with.
3. Punitive damages for leakage of industrial technologies (Article 22-2)
Similar to the punitive damages award now available for trade secret misappropriation (effective July 9, 2019), infringement of industrial technologies will also be entitled to seek recovery of up to three times the actual damages suffered.
4. National Intelligence Service (NIS) given jurisdiction to investigate industrial technology infringement cases (Article 15)
With the NIS’s jurisdiction to investigate industrial technology leakage cases now codified in the ITA Amendment, the NIS is expected to take initiative to more actively investigate such cases.
5. Strengthened punishment for leakage of National Core Technologies outside of Korea (Article 36)
| Category | Before ITA Amendment | After ITA Amendment |
| Leakage of National Core Technologies outside Korea | Imprisonment of 15 years or less OR criminal fine of KRW 1.5 billion or less (about USD 1.2 million) | Imprisonment of three years or more AND criminal fine of KRW 1.5 billion or less |
| Leakage of industrial technologies (including National Core Technologies) within Korea | Imprisonment of seven years or less OR criminal fine of KRW 700 million or less (about USD 580,000) | Imprisonment of ten years or less OR criminal fine of KRW 1 billion or less (about USD 830,000) |
6. Strengthened protection for right-holders during judicial proceedings related to industrial technologies (Article 22(3)-(6))
In a lawsuit involving leakage or infringement of industrial technologies, the court can now order the accused infringer to produce materials related to his/her infringing acts and/or damages caused, thereby lowering the relevant burden of proof on the part of the injured company. Further, protective measures (through court orders compelling confidentiality) have been adopted to prevent utilization of the industrial technologies at issue outside the court proceedings and the party in violation of such protective measures will face criminal prosecution.
In short, the ITA Amendment greatly strengthened the protection of industrial technologies and also expanded the scope of obligations on the part of companies with National Core Technologies.
With the categories of National Core Technologies expanded recently on July 8, 2019, more companies will be now subject to the laws/regulations governing those technologies. As it is expected that the scope will be further expanded, companies should first check whether their business operations involve any of the enumerated categories of National Core Technologies to ensure compliance with the ITA.
Finally, the current ITA Amendment provides that more detailed guidelines to implement the above changes will be further clarified through a Presidential Decree to follow. Considering its practical, significant implication, companies dealing with National Core Technologies would be well advised to closely monitor relevant future developments.
Related Topics
#Industrial Technology Protection Act #Trade Secret #Legal Update
