[Attorney Taejin Kim’s Trade Secret Series 4] Complete Analysis of Criminal Punishment Provisions – Punishment System under the Unfair Competition Prevention Act and Industrial Technology Protection Act

1. Legal Foundation and Basic Structure of Trade Secret Infringement Crimes

Criminal protection of trade secrets is primarily governed by the Unfair Competition Prevention Act and the Industrial Technology Protection Act. Under the Unfair Competition Prevention Act, trade secrets refer to undisclosed information with independent economic value that is confidentially managed, including production methods, sales methods, and other technical or managerial information useful for business activities.

The 2019 legal amendment changed the requirement from “managed with considerable effort” to “confidentially managed,” relaxing the criteria for trade secret recognition. This change reflects the legislative intent to strengthen trade secret protection.

2. Detailed Analysis of Six Types of Infringement Acts

Article 2, Paragraph 3 of the Unfair Competition Prevention Act specifies trade secret infringement acts into six types. This enumeration method can be broadly divided into acts of acquiring others’ trade secrets through improper means and acts of disclosing trade secrets in violation of duties by those in positions to handle trade secrets.

This enumeration method aims to ensure legal stability by clarifying punishable acts, though it has been pointed out that it may have limitations in encompassing new types of infringement acts in practice.

3. Differences in Elements Between Criminal Punishment and Civil Liability

The Unfair Competition Prevention Act adopts a method of establishing independent criminal elements in Article 18 rather than directly citing the infringement acts in Article 2. Therefore, there are differences in the elements between trade secret infringement acts (subject to civil liability) and infringement crimes (subject to criminal punishment).

In some cases, it has been suggested that the interpretation of criminal punishment provisions may have a broader scope of application than civil liability subjects. This legislative approach is understood as differentiating the regulatory systems for civil and criminal matters by establishing elements appropriate to each characteristic.

4. Interpretative Issues and Practical Disputes by Key Crime Types

Recent legal amendments have diversified the modes of trade secret infringement acts.

Interpretation of Unauthorized Disclosure Outside Designated Areas

Acts of unauthorized disclosure of trade secrets outside designated places for the purpose of obtaining improper benefits or causing damage to trade secret holders have been newly criminalized.

Interpretation of the Scope of “Designated Places”

While there is no explicit definition of the concept of “designated places” itself, it is interpreted to refer to internal management areas, etc., in the context of the provision punishing acts of taking things “outside designated places.”

“Disclosure” Concept and Its Relationship with Unauthorized Removal

Considering the relationship between punishment provisions, to avoid the problem of simultaneous establishment of the disclosure crime under Article 18, Paragraph 1, Subparagraph 1(a) and the unauthorized disclosure crime under Subparagraph 1(b), the prevailing view is that “disclosure” in this provision should be interpreted as simply taking trade secrets outside designated places (“unauthorized removal”). In other words, it treats the act of removing trade secrets from the company’s control as punishable even if it does not necessarily lead to disclosure.

Analysis of Continuous Possession Despite Deletion/Return Demands

Acts of continuing to possess trade secrets despite demands from trade secret holders to delete or return them for the purpose of obtaining improper benefits or causing damage to trade secret holders have been newly made punishable.

Need to Confirm Legitimate Authority of “Trade Secret Holders”

For this crime to be established, it would be necessary to confirm whether the “trade secret holder” has legitimate authority to demand deletion or return. This is because the definition of trade secrets presupposes possession by legitimate rights holders.

Questions About the Possibility of Punishing Attempted Crimes and Preparation/Conspiracy for Continuous Possession

Since continuous possession acts are completed through omission and have a strong character that does not presuppose the occurrence of results, it has been suggested that it is difficult to specify preparation and conspiracy acts for such crimes and punishment is practically impossible.

Acquisition by Improper Means and Third-Party Involvement

This punishes acts of acquiring trade secrets by theft, deception, intimidation, or other improper means.

Scope of Interpretation of “Improper Means”

This is interpreted as a broad concept that includes not only criminal acts under criminal law (theft, deception, intimidation) but also violations of confidentiality duties or inducements to such violations, and all acts or means contrary to social order in light of sound transaction order or fair competition principles.

Third-Party Subsequent Involvement Acts

Acts of acquiring or using trade secrets knowing or failing to know due to gross negligence that improper acquisition acts were involved, or acts of using or disclosing after acquisition knowing or failing to know such facts due to gross negligence, and other subsequent acquisition, use, and disclosure acts by third parties regarding trade secrets acquired through improper methods are also subject to punishment.

5. Systematization of Sentencing Standards and Punishment Levels

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

Domestic Purpose Acts

Acts of acquiring, using, or disclosing trade secrets to third parties for the purpose of obtaining improper benefits or causing damage to trade secret holders are punished by imprisonment for not more than 10 years or a fine of not more than 500 million won. The statutory penalties have been increased compared to before the amendment.

Foreign Purpose Acts (Aggravated Punishment)

Acts of acquiring, using, or disclosing trade secrets to third parties knowing they will be used abroad or for the purpose of obtaining improper benefits or causing damage to trade secret holders are punished by imprisonment for not more than 15 years or a fine of not more than 1.5 billion won. Aggravated punishment provisions for foreign leakage existed previously.

Fines Based on Property Gains

When property gains from violations exceed a certain amount, fines are set within the range of 2 to 10 times the property gains. The difficulty in calculating gains has been pointed out as making practical sanctions challenging.

6. Special Regulatory System under the Industrial Technology Protection Act

The Industrial Technology Protection Act is a law with different purposes and systems from the trade secret protection law, focusing primarily on protecting the nation’s core technologies.

6.1 Conceptual Distinction Between Industrial Technology and Trade Secrets

Industrial technology under the Industrial Technology Protection Act refers to technical information necessary for the development, production, distribution, and use of products or services that is designated, announced, proclaimed, or certified by heads of administrative agencies according to laws. This does not necessarily require secrecy and differs from trade secrets in that it involves designation and announcement procedures by heads of central administrative agencies.

National core technologies are included within the scope of industrial technology and refer to technologies designated as having the potential to cause serious adverse effects on national security and the national economy if leaked. The Industrial Technology Protection Act aims at national security, differentiating it from the trade secret protection law which focuses on protecting the private interests of individual economic entities.

Additionally, the Industrial Technology Protection Act protects only technical information, while the trade secret protection law includes both technical and managerial information.

6.2 Characteristics of Injunctive Relief Against Infringement

Target institutions (institutions possessing and managing national core technologies) may petition courts to prohibit or prevent acts by those who commit or intend to commit industrial technology infringement acts. They may also petition for necessary measures such as disposal of objects that created infringement acts and removal of facilities.

6.3 Special Criminal Punishment Provisions and Aggravating Factors

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

Foreign Use Purpose Penalties (Aggravated Punishment)

Those who commit acts under Article 14 of the same law, such as improperly acquiring, disclosing, or using industrial technology for the purpose of use abroad or causing it to be used abroad, are punished by imprisonment for not more than 15 years or a fine of not more than 1.5 billion won.

Domestic Use Purpose Penalties

When committing acts of acquiring, disclosing, or using industrial technology for domestic use or causing it to be used domestically, punishment is imprisonment for not more than 7 years or a fine of not more than 700 million won.

Concurrent Imposition of Imprisonment and Fines

In the above cases, imprisonment and fines may be imposed concurrently.

Confiscation of Gains

The Industrial Technology Protection Act has the characteristic of being able to confiscate all profits obtained by infringers from infringement acts. This is a difference from the trade secret protection law.

Punishment for Attempted Crimes and Preparation/Conspiracy

Attempted crimes under Article 14 infringement acts are also punished. Additionally, there are punishment provisions for preparation or conspiracy for acts committed for the purpose of using industrial technology abroad or acts corresponding to domestic cases (foreign purpose: imprisonment for not more than 3 years or fine of not more than 30 million won / domestic purpose: imprisonment for not more than 2 years or fine of not more than 20 million won).