In Korea, the Act on Prevention of Leakage and Protection of Industrial Technology ("ITA") provides for the protection of industrial technologies such as National Core Technology ("NCT") which, if leaked, may result in a detrimental effect on the national security. The amendment to the ITA that was promulgated on August 20, 2019 recently took effect on February 21, 2020. The amendment reflects the key elements of the Korean government's "Plans to Combat/Prevent Leakage of Industrial Technologies" which was announced in early 2019. Specific legislative changes include the following:

• Obligations on companies to limit or manage the ability of technical personnel to transfer employment who have access to NCTs (Article 10);
• Prior approval and reporting requirement for M&As where foreign companies acquire domestic companies possessing NCTs (Article 11-2);
• Stronger civil and criminal measures against misappropriation/unauthorized disclosure of industrial technologies and NCTs, including introduction of punitive damages allowing an injured party to recover up to 3 times the amount of actual damages (Article 22-2), and potential imprisonment of at least 3 years (Article 36); and
• Establishment of legal basis on which information and investigation agencies are able to conduct investigations of misappropriation of industrial technologies (Article 15).

In accordance with these legislative amendments, changes have been made to the corresponding Enforcement Decree and Enforcement Regulation as well. It should be noted that the provision related to M&A by foreign companies in the amended Enforcement Decree (Article 18-5) applies to M&A transactions that are currently in progress, not just future transactions.

It is possible in some circumstances that foreign companies may be considered to possess NCTs or industrial technologies under the ITA. In such cases, it would be necessary to pay particular attention to legal requirements such as the filing of export reports and the obtaining of export approvals during the course of communications with the company's overseas subsidiaries. Thus, it is important for all companies that operate in Korea to (i) determine whether they possess NCTs or industrial technologies, and (ii) carefully review the potential impact of the abovementioned ITA amendment. Given that unauthorized disclosure of industrial technologies outside of Korea may now lead to criminal penalties including imprisonment, it is especially important that the above considerations are closely reviewed in relation to M&A transactions involving foreign companies. Further, since intentional infringement of NCTs may now be subject to damages awards of up to 3 times the actual damages, the potential financial impact can be significant for companies that do not properly comply with the ITA. 

Given such complexity, it is not always easy for companies to evaluate whether they are appropriately complying with the legal requirements pursuant to the ITA. Considering that the scope of industrial technologies and the relevant regulations are continuously changing, it is highly advisable to carry out an in-depth review of the adequacy of your compliance program, to prevent any unfair adverse consequences.