1.

Key Features of K-Discovery System

The revised Mutual Cooperation Act was drafted with reference to Germany’s expert fact-finding inspection system and the U.S. discovery system to address the so-called “uneven playing field” problem—where key evidence necessary to prove infringement and damages in litigation is disproportionately concentrated within large companies (contracting companies).
 

A.

Introduction of Expert Fact-finding Inspection System (Article 40-6, et seq.)

Under the current law, when evidence of misappropriation of technical materials is concealed within a contracting company, it has been difficult to obtain the evidence in practice solely through a court’s order to produce documents. Furthermore, there has been a lack of effective means to compel production of such materials when the opposing party refuses on the grounds of trade secrets or similar reasons.

The revised Mutual Cooperation Act allows courts, upon a party’s request, to designate an expert to conduct a fact-finding inspection in lawsuits seeking damages for the misuse of technical materials. The court-appointed expert may conduct an on-site inspection by entering the opposing party’s offices or factories to ask questions, inspect and copy documents, and operate equipment directly. If the opposing party refuses to allow the inspection without just cause, the court may accept the requesting party’s assertions as true.

B.

Introduction of Document Preservation Order System (Article 40-11)

A new system has been established to allow a court to order preservation of materials to prevent destruction of evidence when a lawsuit has been filed or is reasonably expected to be filed. Anyone who intentionally destroys materials in violation of such an order may be subject to imprisonment for up to seven years or a fine of up to KRW 100 million.

C.

Introduction of Party-conducted Examination (Article 40-12)

To supplement judge-centered examination procedures, a system has been introduced that allows attorneys, even before a hearing date, to conduct mutual examinations of persons whose testimony or materials are necessary for verifying relevant facts or materials. This is similar to the U.S. deposition system in which statements of parties or witnesses made outside the courtroom may be audio- or video recorded and submitted as evidence, thereby ensuring consistency of testimony and clarify the factual record.

D.

Expansion of Technical Protection Scope and Mandatory Submission of Administrative Investigation Records (Article 25(2) and Article 40(5))

Under the current law, protection applied only to acts of misappropriation occurring after a consignment or commission relationship had been formally established, leaving a gap in protection against technology theft occurring prior to the conclusion of a contract. The amended Mutual Cooperation Act aims to eliminate this blind spot in protecting SME technology by extending coverage to acts of misappropriation committed prior to the conclusion of a consignment or commission contract.

Also, there have been cases where records obtained by the Ministry of SMEs and Startups through administrative investigations were not submitted to a court due to grounds for non-disclosure under other laws and regulations. However, under the amended Mutual Cooperation Act, the Minister of SMEs and Startups is required to submit such administrative investigation records to the court upon the court’s request.

2.

Incorporation of Attorney-Client Privilege (ACP)

The revised Mutual Cooperation Act is also noteworthy for explicitly incorporating provisions related to “Attorney-Client Privilege (ACP)” (Article 26-2) from the amendment to the “Attorney-at-Law Act,” which was recently passed by the National Assembly and promulgated on the same day. Article 26-2 of the proposed amendment to the Attorney-at-Law Act establishes a legal basis for protecting the confidentiality of communications exchanged for the purpose of providing or receiving assistance between a lawyer and a client concerning a legal matter. Furthermore, it exempts from disclosure any documents or materials prepared by a lawyer in connection with a retained matter for use in litigation, investigation, or inquiry.

Under the revised Mutual Cooperation Act, when a court orders an expert inspection, any communications, documents, or materials subject to Article 26-2 of the Attorney-at-Law Act must be excluded from the scope and subject matter of the inspection upon a party’s request. Likewise, in the examination of the parties conducted primarily by a lawyer, the content of communications subject to ACP, as described above, is excluded from the scope of the examination (Article 40-7(1) and Article 40-12(1)).

If a statement made during an examination includes content that falls within ACP, a party may request deletion of such content audio recordings, video recordings, or transcripts. If the court finds the request to be justified, it must delete the relevant content (Article 40-12(9)).

3.

Impact and Implications

The amended Mutual Cooperation Act will take effect on February 20, 2028. This provides a grace period intended to allow the courts to update their information systems and to ensure consistency with other laws and regulations.

As expert inspections and other mechanisms enable direct access to internal corporate documents, the resulting ease of proving technology misappropriation is expected to drive a significant increase in enforcement and litigation by affected companies.

Above all, the passage of the revised Mutual Cooperation Act is expected to serve as a catalyst for the passage of the amendments to the Patent Act and the Unfair Competition Prevention and Trade Secret Protection Act currently pending in the National Assembly. Furthermore, as the disclosure of internal documents make it easier to substantiate an infringer’s intent, there is a growing possibility that courts will more actively apply the provisions for enhanced damages for willful infringement of intellectual property rights.