Non-public Knowledge of Trade Secrets in South Korea

1. Concept and Definition of Non-public Knowledge in South Korea

Non-public knowledge is one of the core requirements for recognition as a trade secret in South Korea. According to the Unfair Competition Prevention Act of South Korea, “trade secret” refers to production methods, sales methods, and other technical or business information useful for business activities that are not publicly known, have independent economic value, and are managed as secrets. The state of being “not publicly known” is precisely non-public knowledge.

Non-public knowledge is closely related to the most important characteristic of trade secrets as ‘competitive property’ in South Korea. Once information becomes publicly known, it loses its value as a secret and becomes difficult to be subject to legal protection. This is because when public knowledge circulates in society, it becomes difficult to determine whether it is subject to legal protection, and this can hinder the circulation and use of information.

For benefits to be recognized as property information subject to protection, the information must generally be unknown. As a corporate law attorney in Songdo, Incheon, I have experienced in practice that many companies find the non-public knowledge requirement the most challenging aspect of trade secret protection in South Korea.

2. Meaning of ‘Not Publicly Known’ in Trade Secret Law of South Korea

“Not publicly known” refers to a state where information is not known to an unspecified number of people, such as being published in publications or other media, so that the information cannot normally be obtained without going through the holder in South Korea.

While the term ‘secret’ in trade secrets already includes the concept that the target information has not been disclosed, the disclosure of a secret does not mean that all parties concerned actually know it. It is sufficient that the secret target is in a state where it can be obtained outside the range where the holder can manage it.

In other words, even if people other than the holder know the information and multiple people know such information, if these people have confidentiality obligations, they are within the range where the holder can manage, and thus it remains in a non-public state.

Conversely, if even just one unspecified outsider knows the information, the fact that it has been leaked externally does not change, and thus it no longer has value worth protecting.

Trade secrets must not be publicly known, but they do not necessarily require absolute secrecy. If relative secrecy is recognized, such as being limited to those with confidentiality obligations and maintaining that limited state, the non-public knowledge requirement is satisfied in South Korea.

This can be compared to novelty under patent law – while patent law loses absolute secrecy based on objective facts if disclosed in publications before filing, the non-public knowledge of trade secrets is relative in that secrecy is not lost if secret management exists even if there are disclosed facts.

3. Economic Value of Information and Non-public Knowledge in South Korea

One of the requirements for becoming a trade secret is having ‘independent economic value’. This means that information holders can gain competitive advantages over competitors through the use of such information, or that significant costs or efforts are required for acquiring or developing such information.

If information cannot provide ‘competitive advantage’ or ‘competitive benefit’ over competitors, it cannot be considered a trade secret. Non-public knowledge is closely related to this economic value in South Korea.

When information becomes publicly known, secret managers lose their advantageous position over other competitors, and since there is no property value worth protecting in such cases, non-public knowledge is required. The judgment of economic utility often tends to be influenced by the results of non-public knowledge determination in South Korea.

4. Standards and Issues in Determining Non-public Knowledge in South Korea

While legal principles regarding secret management requirements are being accumulated and relaxed, the standards for determining non-public knowledge among trade secret establishment requirements still have aspects that are not clearly established in South Korea.

Information sought to be protected as trade secrets is often in the form of combinations of multiple information, and how to compare such combined information with already known information becomes an important issue. When formed by combining known information, it is necessary to determine whether it is a simple listing of information or if it creates new technical and economic value by combining existing known information.

To be recognized for its value as combined information and have non-public knowledge recognized, it must meet one of the following criteria according to expert views:

1. When combining information is not easy for practitioners in the relevant industry
2. When the combination itself is not difficult, but the combined information demonstrates technical effects beyond the simple sum of individual information
3. When the accumulation of combined information itself contributes to cost savings in design, development, etc.

Information that merely collects known information may not need legal protection. When identification with known information is difficult, it may harm the predictability of third parties in South Korea.

5. Target of Judgment (General Public vs. Competitors) in South Korea

Korean precedents use the expression “not known to an unspecified number of people” for ‘not publicly known’, giving the impression that the target for non-public knowledge determination standards is based on ‘unspecified numbers’ or ‘general public’.

However, regarding the concept of trade secret non-public knowledge, in reality, it is not easy to prove that information is publicly known due to its nature, and non-public knowledge may be lost if even one unspecified person (outsider) knows the information in South Korea.

Considering regulations on determining trade secret non-public knowledge in the United States, Japan, and Germany, there is criticism that using the expression ‘unspecified numbers’ in Korean Supreme Court precedents is not desirable.

While being known to the general public means that anyone can obtain the information, in determining trade secret non-public knowledge, the scope that can be considered public is sufficient if some unspecified people, such as those working in the same industry, can obtain the information.

Particularly when related products are launched in the market and non-public knowledge becomes an issue, there can be significant differences in judgment results depending on whether the target who can understand the technical content of the product is the general public or practitioners in the same industry.

There is a view that it is reasonable to set competitors (practitioners in the same industry) as the target for non-public knowledge determination, and clarification of standards is needed in South Korea.

6. Reverse Engineering and Non-public Knowledge in South Korea

If third parties have the possibility of obtaining information through technical analysis (reverse engineering) of products or facilities embodying trade secrets that have been launched in the market, this may be recognized as legitimate acquisition of trade secrets, which could result in denial of infringement or be used as grounds to dispute trade secret establishment requirements in South Korea.

Reverse engineering can be defined as starting from known objects and analyzing the methods by which those objects were developed in reverse. While there is no clear definition in Korean trade secret protection law or precedents, there is no basis to consider reverse engineering of trade secrets (which are not subject to patent protection) as illegal.

Korean Supreme Court precedents have also ruled that competitors cannot be prohibited from acquiring the same technical information through legitimate methods such as independent research and development or reverse engineering.

However, non-public knowledge is not automatically lost simply because reverse engineering is possible. Even if reverse engineering is possible, if such reverse engineering requires special technology or highly specialized knowledge and takes a considerable period, making it impossible for anyone to easily identify the information, it is judged as the “reverse engineerable domain.”

In this case, simple launch of products in the market cannot be considered as disclosure of trade secrets. On the other hand, if the time and cost required for reverse engineering are minimal, allowing anyone to easily analyze products and acquire trade secrets, it is viewed as the “readily ascertainable domain.” In such cases, trade secrets are considered substantially disclosed as soon as products are marketed, leading to loss of non-public knowledge.

Therefore, the difficulty of reverse engineering (technical difficulty) and the required time and cost (economic burden) become important considerations in determining non-public knowledge in South Korea.

7. Risks of Marketing Products Subject to Reverse Engineering in South Korea

Even if non-public knowledge of trade secrets is met due to reverse engineering requiring special technology or highly specialized knowledge and considerable time, marketing products subject to reverse engineering carries certain risks in South Korea.

This is because even if reverse engineering requires significant time and effort, non-public knowledge may be lost the moment someone actually performs reverse engineering, discovers the trade secret, and discloses it.

Particularly with technological advancement, reverse engineering techniques are also developing, and what was difficult in the past may become relatively easy at present. Therefore, companies must fully consider these risks when launching products in the market in South Korea.

8. Possibility of Prohibiting Reverse Engineering through Contracts (German Case)

Article 3, Paragraph 1 b) of the German Trade Secret Protection Act (GeschGehG) provides that even if someone lawfully owns a product for observation, examination, disassembly, or testing, clauses can be established imposing confidentiality obligations while prohibiting reverse engineering.

Therefore, when contracts clearly include clauses prohibiting reverse engineering, violating such clauses to perform reverse engineering may be recognized not only as contract violation but also as trade secret infringement.

Such German regulations need to be referenced in terms of strengthening trade secret protection, and there is a possibility that South Korea may develop in this direction through precedents or legislation.

9. Increased Importance of Non-public Knowledge Determination Due to Relaxation of Secret Management Requirements in South Korea

The revised Unfair Competition Prevention Act of South Korea changed the trade secret recognition requirement from ‘maintained as secret by reasonable efforts’ to ‘managed as secret,’ relaxing the secret management requirement.

This also intends to improve the problem where past precedents strictly interpreted secret management requirements, resulting in many cases not being protected as trade secrets.

As legal principles regarding secret management accumulate and are relaxed, the importance of non-public knowledge determination among trade secret establishment requirements is expected to increase further. As secret management requirements have been relaxed, the role of non-public knowledge requirements in trade secret protection will become more important in South Korea.

10. Need for Clarification of Non-public Knowledge Determination Standards in South Korea

As examined above, there are still aspects not clearly established regarding trade secret non-public knowledge determination standards, particularly who to consider as the target for judgment, and standards related to combinations of known information or reverse engineering.

The need for clarifying these standards is being pointed out, and it is necessary to clarify reverse engineering-related non-public knowledge determination standards (technical difficulty, required cost and time, etc.) for application in our practice, referring to major countries’ operational cases.

Particularly as a corporate attorney, clarifying these judgment standards is essential for providing clear criteria to clients and offering predictable advice in South Korea.

11. Conclusion

Non-public knowledge of trade secrets is a core requirement for trade secret protection and a relative concept that is more relaxed than novelty under patent law. However, there are still unclear aspects in judgment standards that cause difficulties in practice in South Korea.

Particularly, clear standards are needed for determining non-public knowledge of products subject to reverse engineering, criteria for recognizing non-public knowledge of combined information, and setting targets for non-public knowledge determination.

As the 2019 revision of the Unfair Competition Prevention Act relaxed secret management requirements, the importance of non-public knowledge determination is expected to increase further, and companies need to prepare sufficiently for this in South Korea.

Kim & Park Law Firm has recently successfully responded to non-public knowledge issues surrounding reverse engineering possibilities in trade secret protection litigation for manufacturing companies in South Korea, particularly achieving favorable results through specialized arguments on criteria for recognizing non-public knowledge of combined information.