Criminal Penalties for Trade Secret Infringement in South Korea

1. Provisions on Trade Secret Infringement Crimes under the Unfair Competition Prevention Act of South Korea

Criminal penalties for trade secret infringement are primarily governed by the Unfair Competition Prevention Act and the Industrial Technology Protection Act in South Korea. Trade secrets under the Unfair Competition Prevention Act refer to production methods, sales methods, and other technical or business information that is not publicly known, has independent economic value, and is managed as confidential business information.

The 2019 amendment removed the requirement for ‘considerable efforts’ and changed it to ‘managed as secret,’ relaxing the requirements for recognition as trade secrets. This change reflects the legislative intent to strengthen trade secret protection in South Korea.

2. Six Types of Trade Secret Infringement Acts in South Korea

Article 2, Paragraph 3 of the Unfair Competition Prevention Act enumerates six types of trade secret infringement acts. These can be broadly divided into acts that illegally acquire others’ trade secrets through improper means and acts where persons in positions to handle trade secrets disclose them in violation of their duties.

This enumeration method aims to clarify punishable acts and ensure legal stability. However, some point out that such enumeration may not cover all situations in practice.

3. Relationship between Criminal Elements and Infringement Act Types

The Unfair Competition Prevention Act employs a method of enumerating separate criminal elements in Article 18 rather than directly referencing the infringement acts in Article 2. Therefore, the elements of trade secret infringement acts (subject to civil liability) and infringement crimes (subject to criminal punishment) are distinct.

It has been noted that depending on interpretation of criminal penalty provisions, they may have a broader scope of application than civil liability subjects. This legislative approach establishes different regulatory frameworks for civil and criminal law, each with tailored elements according to their respective characteristics.

4. Analysis of Major Crime Types

Recent legal amendments have diversified the types of trade secret infringement activities in South Korea.

Unauthorized Leakage (Leakage Outside Designated Places)

A new provision has been established for unauthorized leakage of trade secrets outside designated places for the purpose of obtaining improper benefits or causing damage to trade secret holders.

Meaning of ‘Designated Places’

While the concept of ‘designated places’ itself is not clearly defined, in the context of provisions punishing acts of taking information outside ‘designated places,’ it may refer to internal management areas or similar designated zones.

Concept of ‘Leakage’ (Relationship with Unauthorized Removal)

Considering relationships between penalty provisions, to avoid simultaneous establishment of disclosure offenses under Article 18, Paragraph 1, Item 1, Subparagraph (a) and unauthorized leakage offenses under Subparagraph (b), it is reasonable to interpret ‘leakage’ in this provision as simply taking trade secrets outside designated places (‘unauthorized removal’). This means that merely removing information from company control constitutes a punishable act, even without actual disclosure.

Continued Possession (Non-compliance with Deletion/Return Request)

A new provision has been established for continued possession of trade secrets despite requests from trade secret holders for deletion or return, with the purpose of obtaining improper benefits or causing damage to trade secret holders.

Need to Confirm Legitimate Rights of ‘Trade Secret Holders’

For this offense to be established, it may be necessary to verify whether the ‘trade secret holder’ has legitimate rights to request deletion or return. Based on the definition of trade secrets, it presupposes that legitimate rights holders should possess the information.

Questions Regarding Attempted/Preparation and Conspiracy Punishment for Continued Possession Offenses

Since continued possession acts are completed through omission and have strong characteristics of not requiring result occurrence, there are views that substantiating preparation and conspiracy acts for such crimes is difficult and practically impossible to punish.

Acquisition through Illegal Means

This provision punishes acquisition of trade secrets through theft, fraud, intimidation, or other improper means.

Scope of ‘Improper Means’

This is interpreted broadly to include not only criminal law offenses (theft, fraud, intimidation) but also all acts or means contrary to social order in light of sound transaction order or fair competition principles, such as violations of confidentiality obligations or inducement of such violations.

Third Party’s Subsequent Involvement Acts

Third parties’ subsequent acquisition, use, or disclosure acts regarding trade secrets obtained through improper methods are also subject to punishment, including acts of acquiring or using trade secrets knowing or failing to know due to gross negligence about involvement of improper acquisition acts, or using or disclosing them after learning of such facts through gross negligence.

5. Legal Penalties and Sentence Classifications in South Korea

Article 18 of the Unfair Competition Prevention Act classifies and punishes trade secret infringement acts as follows:

Domestic Purpose Acts

Acts such as acquiring, using, or disclosing trade secrets to third parties for improper benefits or to cause damage to trade secret holders are punishable by imprisonment not exceeding 7 years or fines not exceeding 700 million KRW. Legal penalties have been increased compared to pre-amendment provisions in South Korea.

Foreign Purpose Acts (Aggravated Punishment)

Acts such as acquiring, using, or disclosing trade secrets to third parties knowing they will be used abroad for improper benefits or to cause damage to trade secret holders are punishable by imprisonment not exceeding 10 years or fines not exceeding 1 billion KRW. Aggravated punishment provisions for foreign leakage existed previously.

Property Gain-Based Fines

When property gains from violations exceed certain amounts, fines range from 2 to 10 times the property gains. Difficulties in calculating gains present practical challenges for implementing sanctions in South Korea.

6. Regulation of Industrial Technology Leakage under Industrial Technology Protection Act of South Korea

The Industrial Technology Protection Act is legislation with different purposes and frameworks from the Trade Secret Protection Act, primarily focusing on protecting national core technologies in South Korea.

6.1 Concept of Industrial Technology and Differences from Trade Secrets

Industrial technology under the Industrial Technology Protection Act refers to technology among technical information necessary for product or service development, production, distribution, and use that is designated, notified, announced, or certified by relevant administrative agency heads according to laws. Unlike trade secrets, this does not require secrecy and involves designation and notification procedures by central administrative agencies.

National core technologies are included within industrial technology scope, referring to technologies that could cause serious adverse effects on national security and economic development if leaked overseas. The Industrial Technology Protection Act aims for national security, differing from the Trade Secret Protection Act’s focus on protecting individual economic entities’ private interests.

Additionally, the Industrial Technology Protection Act only covers technical information, while the Trade Secret Protection Act includes both technical and business information.

6.2 Claim for Prohibition of Industrial Technology Infringement Acts

Target organizations (national core technology holding and managing institutions) may petition courts to prohibit or prevent industrial technology infringement acts by those committing or attempting such acts. They may also seek necessary measures such as disposal of infringing objects and equipment removal.

6.3 Criminal Penalty Provisions under Industrial Technology Protection Act

Article 36 of the Industrial Technology Protection Act punishes industrial technology infringement acts as follows:

Foreign Use Purpose Penalties (Aggravated Punishment)

Those committing acts under Article 14, such as improperly acquiring, disclosing, or using industrial technology for foreign use purposes, face imprisonment not exceeding 15 years or fines not exceeding 1.5 billion KRW.

Domestic Use Purpose Penalties

For acts of acquiring, disclosing, or using industrial technology for domestic use purposes, penalties include imprisonment not exceeding 7 years or fines not exceeding 700 million KRW.

Combined Imprisonment and Fine Sentences

Both imprisonment and fine sentences may be imposed concurrently for the above cases.

Confiscation of Gains

The Industrial Technology Protection Act features provisions for confiscating all property gains obtained through infringement acts, distinguishing it from the Trade Secret Protection Act.

Attempt, Preparation, and Conspiracy Punishment

Attempts at Article 14 infringement acts are also punishable. Additionally, preparation or conspiracy for acts intended for foreign or domestic use carries penalties (foreign purpose: imprisonment not exceeding 3 years or fines not exceeding 30 million KRW / domestic purpose: imprisonment not exceeding 2 years or fines not exceeding 20 million KRW).

Joint Penalty Provisions

The Industrial Technology Protection Act includes joint penalty provisions enabling punishment of corporations in addition to individual offenders, considering comprehensive measures actually taken by corporations to prevent violations.

6.4 Requirements for Intent-Based Offenses

Some infringement acts under the Industrial Technology Protection Act require subjective intent from actors. For example, purposes for foreign or domestic use may be necessary. Additionally, illegality is recognized when improperly acquiring, leaking, using, disclosing, or violating confidentiality obligations.

6.5 Conclusion

Criminal punishment for trade secret infringement is regulated differently under the Unfair Competition Prevention Act and Industrial Technology Protection Act. The Unfair Competition Prevention Act focuses on protecting private interests in confidentially managed trade secrets, with amendments strengthening infringement act types and punishments, though some interpretation and penalty-related issues have been raised.

Conversely, the Industrial Technology Protection Act protects industrial technology important for national competitiveness and security, lacking secrecy requirements but including designation procedures and confiscation provisions, differing from the Trade Secret Protection Act.

Both laws apply different criminal penalty provisions according to protection targets and purposes, sharing the commonality of aggravated punishment for foreign leakage. Companies must understand these legal differences and establish protection strategies meeting respective requirements in South Korea.