An amendment to the Industrial Technology Protection Act (the “ITA Amendment”) was promulgated on August 20, 2019 and will take effect on February 21, 2020. The ITA Amendment is intended to reflect the Korean government’s “Plans to Combat/Prevent Leakage of Industrial Technologies” announced in January 2019, and may be especially of interest given recent global trade tensions.
In summary, the most notable changes introduced by the ITA Amendment are: (i) expanded protection obligation for National Core Technologies (“NCTs”) and stricter regulation for foreign companies’ acquisition of domestic companies having NCTs; (ii) increased sanctions for infringements, such as leakage, misuse and misappropriation, of industrial technologies and the introduction of other remedies; and (iii) protective measures to prevent the leakage of industrial technologies during judicial proceedings.
Details of the ITA Amendment
1. Expanded obligations of heads of companies that have or manage NCTs (Article 10 (1))
The Industrial Technology Protection Act designates “technologies which has high technological and economic values in the Korean and overseas markets or brings high growth potential to its related industries and is feared as a technology to exert a significantly adverse effect on the national security and the development of the national economy in the event that it is divulged abroad” among industrial technologies as NCTs. Companies that have or manage NCTs will be required to ensure that technical personnel with access to such technologies enter into an agreement designed to maintain the confidentiality of such technologies in the event of their departure from the company. Companies violating this obligation may be subject to an administrative fine of up to KRW 10 million.
2. Stricter regulation of mergers and acquisitions by foreign companies of domestic companies that have NCTs (Article 11-2)
| Classification | Before ITA Amendment | After ITA Amendment |
| Companies with NCTs developed with R&D funding from the Korean government | Subject to prior reporting | Subject to prior approval |
| Companies with NCTs developed without R&D funding from the Korean government | No applicable regulation | Subject to prior reporting |
The Ministry of Trade, Industry, and Energy (“MOTIE”) is empowered to enforce the prior reporting and approval requirements for mergers and acquisitions involving companies with NCTs, and can issue a corrective order to suspend, prohibit, and/or restore transactions if such requirements are not met.
3. Punitive damages for infringement of industrial technologies (Article 22-2)
Similar to the punitive damages now available for trade secret misappropriation (effective July 9, 2019), infringements of industrial technologies can also be punished with an award of up to three times the actual damages amount.
4. National Intelligence Service (“NIS”) given jurisdiction to investigate industrial technology infringement cases (Article 15)
The ITA Amendment codifies the NIS’s jurisdiction to investigate industrial technology infringement cases. With this additional strengthening of its mandate, going forward the NIS is expected to investigate such cases more actively.
5. Increased punishment for the leakage of NCTs outside of Korea (Article 36)
| Category | Before ITA Amendment | After ITA Amendment |
| Leakage of NCTs outside Korea | Imprisonment of 15 years or less OR criminal fine of KRW 1.5 billion or less | Imprisonment of three years or more AND criminal fine of KRW 1.5 billion or less |
| Leakage of industrial technologies (including NCTs) within Korea | Imprisonment of seven years or less OR criminal fine of KRW 700 million or less | Imprisonment of ten years or less OR criminal fine of KRW 1 billion or less |
6. Stronger protections for right-holders during judicial proceedings related to industrial technologies (Article 22 (3) to (6))
In lawsuits involving the infringement of industrial technologies, courts can now order the accused infringer to produce materials related to the accused bad acts and resulting damages, thereby effectively lowering the burden of proof of the injured company. Further, protective measures through court orders compelling confidentiality are now available to prevent the utilization of the industrial technologies at issue outside the court proceedings, and a party in violation of such protective measures will face criminal prosecution.
Implication
The ITA Amendment has greatly strengthened the protection of industrial technologies in Korea and increased the scope of obligations of companies holding NCTs.
As the categories of NCTs were also recently expanded in July 2019, more companies are now subject to the laws and regulations governing such technologies. Therefore, companies should check whether their business operations involve any of the enumerated categories of NCTs before engaging in any relevant transactions in order to ensure compliance with the ITA, including the upcoming amendments.
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