On July 26, 2022, the Ministry of Trade, Industry and Energy (the “MOTIE”) published a proposed amendment to the Public Notification on the Designation of National Core Technology (the “Proposed Amendment”), in which notable changes include: (i) addition of new technologies to the list of national core technologies (“NCT”); and (ii) a sunset period for individual NCT designations (after which the NCT can be removed from the list or re-designated).
The MOTIE has the authority to designate technologies of particular importance to the country (and subject to special protections) as “national core technology” under the Act on Prevention of Divulgence and Protection of Industrial Technology (the “ITA”), and technologies designated as NCTs are periodically updated in consideration of advancing technologies, changes in the industrial environment, and the technology gap between Korea and foreign countries. The Proposed Amendment partially changes, and adds to, the list of designated NCTs, and newly defines a sunset period for each NCT for the purpose of improving the predictability of regulatory control over NCTs.
1. Changes to NCT List
Under the Proposed Amendment, a new sector relating to hydrogen technologies, which has been subject to active development recently, is added to the NCT list, and one NCT in the automobile sector is modified to expand the scope of coverage. In detail:
|Sector||Newly designated NCTs|
|Design, process and manufacturing technologies for fuel cell for construction/industrial machines of 10kW or greater that are capable of operating continuously for four hours or more at a current density of 1.0A/cm2 or greater|
|Design, manufacturing, diagnosis and controlling technologies for fixed-type fuel cell with a power generation efficiency of 35% or greater and a durability of 40,000 hours or more|
|Sector||Before amendment||After amendment|
|Design and manufacturing technologies for hybrid and electric power based vehicle (“xEV”) systems (limited to control unit, battery management system, and regenerative braking system)||Design and manufacturing technologies for hybrid and electric power based vehicle (“xEV”) systems (limited to control unit, battery management system, regenerative braking system, electric drive system (motor, inverter), and heating, ventilation, and air conditioning (“HVAC”) systems|
2. Designation of Sunset Period for Each NCT
Under the Proposed Amendment, when designating an NCT, the MOTIE and related central administrative agencies may decide an applicable sunset period of up to five years. Once the corresponding sunset period expires, the MOTIE may remove the NCT from the list, or re-designate it in the list.
Under the ITA, a corporation in possession of an NCT (“Subject Institution”) is required to take certain protective measures relating to the NCT, including the designation of a protection zone and appointment of NCT management personnel (Article 10 of the ITA). If a Subject Institution intends to export an NCT, it must first report to, or obtain approval from the MOTIE, depending on the technology (Article 11 of the ITA). If a non-Korean person or entity intends to acquire or merge with a Subject Institution (“Foreign M&A”), the Subject Institution must first report to or obtain approval from the MOTIE (Article 11-2 of the ITA).
The “export” of NCTs includes any act of a Subject Institution sharing or delivering an NCT to a non-Korean company for the purpose of joint research. This concept is very broadly construed, such that a company that owns a patent on an NCT and enters into a cross-license agreement with a non-Korean company, or grants a non-exclusive license to a non-Korean company to the patent, is likely to be seen as “exporting” the NCT. Therefore, it will be increasingly important to examine in advance whether NCT regulations may apply to any patent license agreement or similar arrangement that may be concluded with a non-Korean company.
Under the ITA, criminal sanctions, including imprisonment of up to 15 years or a fine of up to KRW 1.5 billion, can be imposed on any party that exports an NCT for the purpose of using certain technology or causing its use in a foreign country without obtaining approval from or filing a report to the MOTIE (Article 36 of the ITA). The ITA has been amended repeatedly to introduce stricter controls over NCTs, such as by introducing punitive damages for infringement on NCT (Article 22-2 of the ITA). The Korean government is expected to increase enforcement efforts relating to NCTs as well.
As such, companies that possess technologies in the field of hydrogen technology or automobiles that may be designated as NCTs under the Proposed Amendment are well advised to check in advance whether their technologies are NCTs, and if so, to check whether they are in compliance with NCT regulations and to track any relevant sunset periods pertaining to the NCTs.