Leakage of trade secrets or industrial technologies, which are subject to criminal penalties in Korea, have gained much attention over the past few years as the country becomes home to more and more advanced and competitive technologies.

However, the level of punishment has not caught up with the gravity of the crimes, even though there is a broad consensus that misappropriating trade secrets or industrial technologies is a serious crime that poses a threat to national security and competitiveness. It is not uncommon for persons found guilty to get a suspended sentence or only pay monetary fines. Accordingly, the Korean authorities are making efforts to strengthen investigations and punishments while making legislative changes for better protection of trade secrets and industrial technologies.

1. Stronger Investigation of Crimes

The Supreme Prosecutors' Office (SPO) announced plans to strengthen their investigation and response system for economic security and technology protection in October 2022. Acknowledging that punishments have not been commensurate with the gravity of the crimes, especially with some incidents simply going unnoticed, the SPO expressed its commitment to cracking down by (i) mobilizing a crime response network to share relevant information; (ii) securing materials that evidence the damage resulting from the leakage for proper sentencing; (iii) strengthening case management processes within the Prosecutors' Offices; and (iv) making sure that all illegal profits are confiscated.

The police also joined forces to improve investigations by, for example, launching a task force for economic security crime investigation under the National Police Agency, setting up investigation teams in the national security departments of 41 base police stations, and working to open crime report centers for misappropriation of industrial technology at 202 police stations.

The National Intelligence Service (NIS) also confirmed there has been an increasing number of leaks of industrial and national core technologies. In response, it is strengthening industrial technology protection systems and building a database of professionals and experts. The Ministry of Trade, Industry and Energy has also implemented Operation Rules on Foreign Investment Security Review Procedure in August 2022 to conduct review on proposed foreign investment deals that may cause technology transfers to foreign countries.

2. Heavier Punishment by the Courts
 
The judicial branch amended the sentencing standard on intellectual property crimes on December 6, 2021, effective since March 1, 2022. However, some have argued that the amended standard is insufficient to prevent crimes, as it allows mitigated sentencing where the harm was avoided due to early investigations. The Ministry of Justice and the SPO, along with other relevant authorities, have indicated that heavier sentencing on misappropriation of trade secrets and industrial technologies should be imposed.

Consequently, going forward, we may be seeing heavier sentencing. For example, in a case where former employees of a display material manufacturer were indicted for leaking trade secrets of the former employer to China, the first-instance court found the defendants not guilty and partially dismissed the indictment on procedural grounds. However, on appeal, the appellate court sentenced one of the defendants to a jail term of two years, arresting the person directly from the courtroom, pending appeal to the Supreme Court. Moreover, the second defendant was also found guilty on appeal and was sentenced to pay a criminal fine.

3. Stronger Protection by Statutory Amendment

The Act on Prevention of Divulgence and Protection of Industrial Technology (ITA) was amended to ease the intent requirement for establishing misappropriation of industrial technologies. The amendment was announced on January 3, 2023 and took effect on April 4, 2023. Previously, Article 14 prevented divulging industrial technologies "for the purpose of causing harm" to the entity that possessed the technology and consolidating with or acquiring a target company without approval or report "for the purpose of causing the technology to be used abroad." After the amendment, the language prescribing the requisite intent will be lowered to "knowing that harm will be caused" and "knowing that the technology will be used abroad," making it easier to establish liability.

Moreover, new amendments to the Unfair Competition Prevention and Trade Secret Protection Act (UCPA) are under review that would (1) include a new clause on confiscation and collection of items acquired or created by misappropriating trade secrets with the intent to prevent secondary damage; and (2) expands the scope of punishable acts by including the act of damaging or deleting trade secrets by hacking into or attacking computers or data systems via viruses or other means.

In view of the additional scrutiny and protections that trade secrets and industrial technologies are receiving in Korea, we recommend reviewing your policies and practices to ensure your information is properly protected and to ensure that you are not inadvertently or unknowingly receiving a third parties' protected information.