[Attorney Taejin Kim’s Trade Secret Masterclass] Complete Guide to Trade Secret Protection Law – From Basic Concepts to Practice

1. Why is Trade Secret Protection Critical? Understanding Basic Concepts

In today’s business environment, the core of corporate competitiveness lies in the technology and information companies possess. Particularly in the digital age, corporate technical know-how and business information have become the most crucial assets determining company value.

Companies must strategically choose between two primary approaches to protect their core technologies. The first is securing intellectual property rights through patent applications, and the second is protection as trade secrets. The greatest appeal of trade secret protection is the potential for indefinite protection as long as secrecy is maintained.

The Unfair Competition Prevention and Trade Secret Protection Act (Unfair Competition Prevention Act) defines trade secrets in Article 2, Paragraph 2 as follows: “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 scope of trade secrets is extremely broad, encompassing everything from business data such as customer lists and business partner information to cutting-edge manufacturing technologies. However, unlike patent rights, trade secrets have the characteristic of being difficult to clearly identify their substance and scope from the outside, making this an important point of contention in legal disputes.

2. Essential Requirements for Trade Secret Recognition

Core Elements of Non-disclosure Requirements

Non-disclosure means that the information is not publicly known to the general public or unspecified persons. This is the most fundamental prerequisite for establishing trade secrets.

Given the irreversible nature of information disclosure, once information circulates in society, it is considered public property rather than individual exclusive property. Therefore, there is a risk of losing non-disclosure if information is leaked to even one outsider.

A particularly noteworthy issue is reverse engineering. Including reverse-engineerable technology in products released to market carries the risk of losing non-disclosure. Although non-disclosure may be maintained initially if reverse engineering requires advanced technology and considerable time, protection can end the moment someone actually decodes the technology and makes it public.

Confidential Management Requirements and Practical Application

Confidential management means that the information holder manages the information as a secret. Through the 2019 amendment to the Unfair Competition Prevention Act, the requirement was relaxed by removing the “considerable effort” clause from the previous “managed as secret through considerable effort” to simply “managed as secret.”

This amendment has significant meaning. Previously, there was confusion due to inconsistencies between case law and legal text, and despite most trade secret leaks occurring through internal employees, perpetrators frequently received immunity through the “considerable effort” requirement.

Even under the amended law, trade secret holders must still take appropriate levels of confidential management measures. However, experts believe that judgment criteria should be applied more realistically in line with the amendment’s purpose, and customized management methods considering company size and characteristics should be recognized.

Criteria for Determining Economic Utility

Independent economic value means that possessing the information should enable gaining competitive advantage. Information that can be easily derived through simple analysis or general methods is difficult to recognize as having independent economic value.

The fundamental purpose of prohibiting trade secret infringement is to prevent infringers from gaining unfair benefits or having advantageous starting points over fair competitors, and to restore information holders to their original competitive position. Therefore, economic utility determination tends to be closely related to non-disclosure determination, with economic utility often being recognized when non-disclosure is established.

3. Trade Secret Protection Framework under the Unfair Competition Prevention Act

The Unfair Competition Prevention Act, in addition to defining trade secrets, specifically lists six types of trade secret infringement acts in Article 2, Paragraph 3. This enumeration approach helps prevent excessive regulation and enhances legal predictability.

Infringement acts can be broadly categorized into acquisition, use, and disclosure through improper means, and use and disclosure for improper purposes such as breach of confidentiality obligations.

The Unfair Competition Prevention Act provides comprehensive remedies for trade secret infringement. Civil remedies include injunction claims (Article 10), damage compensation claims (Article 11), and credit recovery claims (Article 12), while also establishing criminal punishment provisions.

A notable point regarding criminal punishment is that Article 18 establishes separate criminal elements rather than simply citing the infringement “acts” in Article 2, Paragraph 3. This means that civil infringement acts and criminal punishment targets do not always align, and some analyses suggest that acts not constituting civil infringement may still be subject to criminal punishment.

Criminal punishment provisions have been significantly strengthened through the 2019 amendment. Punishable acts have been expanded and statutory penalties increased, with new punishable acts including acquisition, use, or disclosure for the purpose of gaining unfair benefits or causing harm, unauthorized removal, and refusal to return upon demand.

4. Special Protection System under the Industrial Technology Protection Act

The “Act on Prevention of Divulgence and Protection of Industrial Technology (Industrial Technology Protection Act)” establishes a special protection framework for industrial technology and national core technology.

Industrial technology refers to all technical information necessary for product or service development, production, distribution, and use that is designated, announced, proclaimed, or certified by relevant central administrative agency heads under relevant laws for enhancing industrial competitiveness or preventing leakage.

National core technology is managed under even stricter standards. It refers to technology with high technical and economic value in domestic and international markets or high growth potential in related industries, where overseas leakage could cause serious adverse effects on national security and national economic development, designated by the Minister of Trade, Industry and Energy after deliberation by the Industrial Technology Protection Committee.

A particularly noteworthy point is that when target organizations possessing national core technology developed with government research and development support wish to export such technology to foreign companies through sale or transfer, they must obtain approval from the Minister of Trade, Industry and Energy. This is significant in providing legal grounds for controlling even legitimate technology outflows.

5. Key Differences Between Trade Secret and Industrial Technology Protection

Secrecy Requirements

Trade secrets must have secrecy to receive protection. In contrast, industrial technology under the Industrial Technology Protection Act does not require secrecy as an essential element. Since industrial technology is designated by administrative agencies, even if some content is disclosed through patent registration, it is not excluded from confidentiality obligations unless the entire technology is disclosed.

Designation and Management Procedures

Trade secrets are information that holders decide to manage as confidential. In contrast, industrial technology under the Industrial Technology Protection Act requires designation and announcement procedures by central administrative agency heads, and national core technology involves designation and management procedures by the Minister of Trade, Industry and Energy.

Protection Purpose Differences

Trade secret protection law focuses on protecting individual economic entities’ private interests. In contrast, the Industrial Technology Protection Act covers industrial technology of all research institutions including public institutions, with stronger public interest purposes of enhancing national industrial competitiveness and preventing leakage.

Punishment Level Differences

The punishment levels for infringement acts under both laws differ. The Industrial Technology Protection Act prescribes more severe penalties than trade secret protection law in some cases, stemming from the difference that trade secret protection law aims to maintain sound transaction order while the Industrial Technology Protection Act aims for national security.

6. Conclusion and Practical Guidelines

Trade secret protection is an unavoidable core challenge in modern corporate management. The Unfair Competition Prevention Act and Industrial Technology Protection Act protect technical information from different perspectives and purposes, and companies must accurately understand and utilize these laws’ characteristics and differences to protect their core assets.

Particularly with the 2019 amendment to the Unfair Competition Prevention Act relaxing confidential management requirements, the legal environment continues to evolve, requiring companies to continuously update their trade secret protection systems in accordance with these changes.

Atlas Legal has experience successfully resolving numerous trade secret cases related to core technology protection for multiple companies recently. We are particularly recognized for our expertise in trade secret protection system establishment consulting for manufacturing companies.