The Ministry of Trade, Industry and Energy (the “MOTIE”) announced proposed amendments to the Act on Prevention of Divulgence and Protection of Industrial Technology (the “Industrial Technology Protection Act” or “ITA”) in the second quarter of last year, which expanded the scope of regulated national core technologies (Public Notice No. 2023-538 of the MOTIE, the “First Series of Amendments”). This First Series of Amendments was approved in the State Council meeting on September 25, 2023.
On September 26, 2023, the MOTIE proposed additional amendments to the ITA, further strengthening the regulatory framework (Bill No. 2124745, the “Second Series of Amendments”). Other legislative proposals that seek to increase the protection for national core technologies are also pending at the National Assembly.
The ITA specifically aims to protect “national core technologies” (“NCTs”) which, compared to other industrial technologies, hold greater technical and economic value in domestic and international markets or exhibit more substantial growth potential in respective industries. The need for this oversight is due to the potentially adverse impact on national security and economic development that could result from such technologies being leaked abroad. Therefore, businesses in possession of NCTs (“Target Entity”) are subject to various regulations. For example, a Target Entity must either apply for approval or report to the Government before exporting its NCT. The Government may also conduct a review of a Target Entity’s NCT management practices.
In our previous newsletter (Link), we examined the First Series of Amendments to the ITA, which expanded the scope of the ITA’s application and strengthened the administration system for managing NCTs. Since then, the State Council has approved the First Series of Amendments. Following this, the MOTIE has recently proposed the Second Series of Amendments, further expanding the Government’s regulatory authority in alignment with global trends towards enhancing the protection of critical technologies.
1. |
Second Series of Amendments Proposed by the MOTIE |
(1) |
Clarifying that notification of an NCT export requires acceptance by the MOTIE (Draft Article 11) |
(2) |
Streamlining process for initiating corrective action against non-compliant NCT exports and M&A transactions (Draft Articles 11 and 11.2) |
(3) |
Requiring joint application by both parties for overseas M&A approval (Draft Article 11.2) |
(4) |
Allowing the imposition of daily fines to enforce compliance with corrective orders (Draft Article 11.3) |
2. |
Other Bills Pending at the National Assembly |
In addition to the MOTIE’s proposals, other proposed changes to the ITA are currently pending in the National Assembly. These changes include (i) raising the statutory penalties for technology leakage crimes; (ii) lowering the burden of proof from proving a “purpose” to proving “intent”; (iii) prohibiting activities that involve brokering, facilitating or encouraging infringement or leakage of NCTs; (iv) imposing restrictions on those who have been employed at a Target Entity for over three years from joining overseas companies in related industries; and (v) enhancing oversight of Target Entities’ NCT management practices.
In conclusion, the MOTIE’s First and Second Series of Amendments, as well as other proposed amendments to the ITA, contain significant revisions that further strengthen the regulation of NCTs and reflect the issues and concerns raised by practitioners. Target Entities and businesses that may possess NCTs are strongly advised to keep abreast of these proposed amendments and corresponding revisions to the enforcement decree.