South Korea’s Moves to Safeguard Its Technologies: Statutory Amendment and the Comprehensive Protective Plan

The proposed amendments to the Act on Prevention of Divulgence and Protection of Industrial Technology (the “Industrial Technology Protection Act” or ITA) passed the plenary session of the National Assembly on December 27, 2024 (“Proposed Amendments”). The Proposed Amendments, set to take effect six months from the date of promulgation, aim to enhance the management of industrial technologies, including “national core technologies” (“NCTs”), and expand the scope of punishable infringing acts. On the same day, the Ministry of Trade, Industry and Energy (“MOTIE”) unveiled the 5^thComprehensive Plan on Prevention of Divulgence and Protection of Industrial Technology (the “5^th Comprehensive Plan”), which will be implemented over the next three years.

1.	Key Highlights of the ITA Amendments

(1)

Systematic Management of NCTs

Determining whether a technology qualifies as an NCT is crucial for businesses, given the strict regulations applicable to NCTs. Previously, the NCT determination process could only be initiated by the possessor’s application to the MOTIE Minister. The Proposed Amendments now allow the MOTIE Minister to demand, ex officio, that potential NCT holders submit an application for determination (Article 9-2). Furthermore, if a technology is classified as an NCT, the possessing entity must register the relevant information with the MOTIE Minister (Article 9-3). Non-compliance with these requirements may result in administrative fines of up to 10 million KRW (Article 39(1)(i), (ii)).

(2)

Tightened Regulations to Prevent Leakage of Industrial Technology Overseas

Under the previous framework, if an NCT-holding entity exported without approval or report, corrective measures followed an investigation and committee review. The Proposed Amendments empower MOTIE to issue immediate corrective orders without such processes (Article 11(8)). The same changes apply to foreign M&A conducted without approval or reporting (Article 11-2(1)). Companies failing to comply may face enforcement charges (Article 11-3).

Additionally, the Proposed Amendments expand scenarios requiring a review of potential impacts on national security and economy if technologies are leaked outside of Korea. This review now includes overseas M&As of entities holding government-funded NCTs (Article 11-2(4)) and also covers the export of non-government-funded NCTs or overseas M&As involving such entities, necessitating MOTIE’s security impact assessment (Article 11(5), 11-2(7)).

(3)

Broader Scope of Infringement and Stricter Punishments

The Proposed Amendments include as infringements: (i) unauthorized removal or use of industrial technologies; (ii) facilitation of technology divulgence; or (iii) unreported or fraudulently reported export of NCTs (Article 14). Notably, the amended ITA will apply to acts of divulgence and infringement occurring abroad (Article 14-4).

In cases of willful infringement, punitive damages may now be up to five times the incurred amount, increased from the previous maximum of three times (Article 22-2(2)). The maximum criminal fine for individuals leaking NCTs abroad has been raised from 1.5 billion to 6.5 billion KRW. If the leaked technology is not classified as an NCT, the fine rises to 3 billion from 1.5 billion KRW (Article 36(1), (2)).

2.	Overview of the 5^th Comprehensive Plan The 5^th Comprehensive Plan, aligned with the Proposed Amendments, aims for enhanced protection and management of NCTs. Key elements include:

Designating new NCTs in high-impact areas such as batteries and aerospace.
Establishing an M&A subcommittee within the Industrial Technology Protection Expert Committee.
Expanding security consulting support for vulnerable entities like universities and SMEs.
Developing management guidelines for core personnel in NCTs through big data analysis.
Establishing standards for cloud protection measures for NCT-holding entities.

MOTIE plans to release Technology Scope Guidelines in the latter half of 2025 to assist entities in determining if their technologies meet NCT criteria. They also aim to strengthen the review of overseas M&A by adding an M&A subcommittee under the Industrial Technology Protection Expert Committee. Additionally, MOTIE will amend the ITA Enforcement Decree and redefine “foreigner” and “control” to expand reviewable events.

The Proposed Amendments signify a pivotal change, addressing practical issues and granting MOTIE greater authority to issue ex officio NCT determinations. This is a crucial moment for companies to assess their holdings and ensure compliance with these evolving regulations.

As the Proposed Amendments and the 5^th Comprehensive Plan could lead to further changes through subordinate regulations and public notices, it is increasingly important to monitor developments not only within the ITA but also in its subsidiary regulations.

[Korean Version]

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