Trade secret Infringers may be prosecuted as criminals in addition to civil litigations. The Korean UCPA stipulates that anyone who illegally acquires trade secret of others or uses or discloses to a third party a misappropriated trade secret may be imprisoned up to ten (10) years or fined in an amount of KRW50,000,000 (approximately US$50,000) or two (2) to ten (10) times of the monetary gains. The fine may amount to the 10 times of the value of the stolen trade secret. In Hyundai Motors case, two former engineers were punished to 3.5 years imprison and US$3 million fines respectively.
Further, the Korean Supreme Court held that the act of divulging trade secret to the competitor for the purpose of gaining economic benefit by former employees shall be punished as criminal violation of the fiduciary duty under the Criminal Code. Besides UCPA, trade secrets misappropriations may be prosecuted under the criminal code, too.
In addition to criminal sanction on individuals, companies may be punished by fine that is KRW50,000,000 (approximately US$50,000) or two (2) to ten (10) times of the value of the stolen trade secrets or monetary gains of infringers.
Showing posts with label trade secrets. Show all posts
Showing posts with label trade secrets. Show all posts
Criminal Procedure of South Korea
1. Initiation of Investigation
Investigation is initiated upon discovery of the possibility that a crime may have been committed. The ultimate responsibility in all investigative procedures is in the hands of the prosecutor. Based on collected evidences, the prosecutor assess the validity of the judgment that a crime has occurred, and take appropriate measures upon this ascertainment.
2. Booking, Arrest & Detention
Booking denotes the formation of a criminal case after initiation. An individual subject to investigation becomes a criminal suspect once a criminal charge has been determined by the investigation agency. In principle, prosecutors or police officers must obtain a warrant issued by a judge to arrest a suspect; however, there exist certain exceptions to these warrant requirements in cases that necessitate "Emergency Arrest" and "Arrest of Flagrant Offender". The prosecutor may detain the arrested suspect with a warrant of detention issued by the judge upon request by the prosecutor within 48 hours from the time of arrest. A suspect may request a preliminary hearing prior to detention, and an arrested or detained suspect may request a review of legality to the court. Through such process, the suspect may be released.
3. Prosecution
4. Trial and Sentencing
A judge hears trial upon motions filed by prosecutors. Sentencing occurs when defendants are found guilty of their charges. The punishment may include death penalty, imprisonment and fine, etc.
Trade Secret Protection in South Korea
1. What is Trade Secret under Korean law?
“Trade secret” under Article 2.2 of the UCPA of Korea means technical or business information that: (i) has not been publicly disclosed, (ii) has an independent economic value, and (iii) has been maintained as secret with substantial effort. The clause of article 2.2 of the UCPA is : "trade secret" means information, including a production method, sale method, useful technical or business information for business activity, that is not known publicly, is the subject of considerable effort to maintain its secrecy and has independent economic value.
2. What is misappropriation or infringement of trade secret under Korean law?
Article 2.3 of the UCPA further stipulates that any of the following acts shall constitute an act of trade secret misappropriation:
(i) acquisition of a trade secret through theft, deception, coercion or other improper means (hereinafter referred to as “act of improper acquisition”), use or disclosure, to a third party, of the acquired trade secret (including disclosure thereof to a third party while maintaining its secrecy);
(ii) acquisition of a trade secret, with the knowledge that an act of improper acquisition was involved with respect to the trade secret or failing to know thereof due to gross negligence, use or disclosure thereof to a third party;
(iii) use or disclosure, to a third party, of a trade secret, with the knowledge gained subsequent to its acquisition that an act of improper acquisition was involved with respect to the trade secret or failing to know thereof due to gross negligence;
(iv) use or disclosure, to a third party, of a trade secret by a person who has a fiduciary duty not to use or divulge the trade secret under a contractual relationship and the like;
(v) acquisition, use or disclosure, to a third party, of a trade secret with the knowledge that the trade secret was disclosed in violation of the fiduciary duty referred to in item (iv) above or failing to know thereof due to gross negligence; and
(vi) use or disclosure, to a third party, of an acquired trade secret with the knowledge gained subsequent to its acquisition that the trade secret was disclosed in violation of the fiduciary duty referred to in item (iv) above or failing to know thereof due to gross negligence.
We can assume that the meaning or scope of misappropriation under Korean law is almost the same as those of misappropriation under American UTSA. Namely, the key points of misappropriation under Korean law include (1) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (2) disclosure or use of a trade secret of another Without express or implied consent by a person who used improper means to acquire Knowledge of the trade secret; or (3) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was (i) derived from a person who had utilized improper means to acquire it; (ii) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (iii) derived from a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (4) before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
3. Remedies for Trade Secret Misappropriation
(1) Injunctive Relief
(2) Damages
A. Actual loss (including lost profits where applicable),
B. Unjust enrichment, and/or
C. Reasonable royalties.
(3) Criminal Sanctions
(2) Damages
A. Actual loss (including lost profits where applicable),
B. Unjust enrichment, and/or
C. Reasonable royalties.
(3) Criminal Sanctions
Basics on Preliminary Injunction Lawsuits in Korea
Preliminary actions to preserve rights are designed to either temporarily preserve the current state or to form a preliminary state. The purpose of the preliminary actions is to avoid undue losses until the final decision is reached or executed.
A party who seeks a preliminary injunction must prove that the party is the owner of the right and that there is an urgent necessity to preserve the right. For the case involving a preliminary injunction of IP infringement, the right to be preserved is easily recognized provided that the IP right is valid and that it was infringed. However, there are several obstacles in recognizing the necessity to preserve the right. For example, even if there is evidence of infringement, if the foreign patent owner has not practiced his patent in Korea, the necessity for preliminary injunction will be a subject of debate. This issue is important when it comes to a preliminary injunction of IP infringement.
In most cases, preliminary injunction against IP users usually endows IP owners with a satisfactory remedy before the main suit, while it may afflict the other party rather severely. Therefore, courts should carefully consider all aspects regarding the necessity to preserve the right immediately. Furthermore, a higher standard of proof is required to prove the necessity because a preliminary injunction in IP infringement action may come to the same satisfaction as the main lawsuit.
When determining the necessity to preserve a right, the validity of the right and the anticipated outcome of the main suit are important factors. Since validity is a prerequisite, courts often face difficulties in recognizing the necessity to preserve the right immediately if there is a probability of invalidating the patent.
In sum, courts must give a consideration of balances between all interests of parties and anticipate a possible outcome of the main suit. And courts will recognize the necessity to preserve a right if the damage caused by IP infringement is not expected to be fully compensated with only the main lawsuit. Preliminary injunctions are not granted when the right holder’s damage is small compared to the infringer’s damage. For example, the necessity to preserve is more readily accepted if the right holder invests a large amount of money in R&D, or if the technology related to IP is developing rapidly and instigating fierce competition between the parties. The infringer’s intent or negligence is certainly an important factor here as well.
Meanwhile, if the right holder remains indifferent and does not take measures for a considerable period of time despite his awareness of the infringement, it will be difficult to persuade the need to preserve the right. And even more so if the right holder is a foreign national who has not exercised his IP right in Korea.
Preliminary Injunction Action to IP infringement is handled by a panel of three judges. In general, the right holder has to file a suit with the court that has jurisdiction over infringer’s residence. The court must give a chance for oral hearing in the case of preliminary injunction of IP infringement. As a standard of proof, it requires lower burden of proof than the main civil suit; i.e., it is enough for parties to prove to the extent that the judge may guess it would be certain. Evidence for preliminary actions should be confined within the scope where they can be examined by the court immediately. For example, they can be in the form of documents, samples or witnesses that are readily available for examination at the court. However, for a patent infringement case, courts will usually allow parties to submit experts’ testimonies and presentation of technical matters.
The party that wins the preliminary action but loses the main suit is liable for the other party’s damages inflicted by exercising the right. The Supreme Court also applies this legal principle to IP cases.[1] Therefore, even if the patentee wins the preliminary action of a patent infringement and/or obtains an expert opinion from a patent attorney or other expert stating that the other party’s act constituted an infringement, the patentee must be liable for the other party’s damage inflicted by exercising the patent right if he loses the main suit.
Furthermore, according to the Supreme Court, an IP owner is liable for compensating other party’s damage if the right holder loses the main suit, if the other party had suffered losses from the cancellation of a contract with his buyer and if the lost was caused by IP owner’s warning to the buyer for criminal liability. In other words, it makes no difference whether or not the IP owner obtains a favorable expert opinion from the Korean Patent Attorney Association (KPAA) before his warning.
A party who seeks a preliminary injunction must prove that the party is the owner of the right and that there is an urgent necessity to preserve the right. For the case involving a preliminary injunction of IP infringement, the right to be preserved is easily recognized provided that the IP right is valid and that it was infringed. However, there are several obstacles in recognizing the necessity to preserve the right. For example, even if there is evidence of infringement, if the foreign patent owner has not practiced his patent in Korea, the necessity for preliminary injunction will be a subject of debate. This issue is important when it comes to a preliminary injunction of IP infringement.
1. The Urgent Necessity to Preserve a Right
In most cases, preliminary injunction against IP users usually endows IP owners with a satisfactory remedy before the main suit, while it may afflict the other party rather severely. Therefore, courts should carefully consider all aspects regarding the necessity to preserve the right immediately. Furthermore, a higher standard of proof is required to prove the necessity because a preliminary injunction in IP infringement action may come to the same satisfaction as the main lawsuit.
When determining the necessity to preserve a right, the validity of the right and the anticipated outcome of the main suit are important factors. Since validity is a prerequisite, courts often face difficulties in recognizing the necessity to preserve the right immediately if there is a probability of invalidating the patent.
In sum, courts must give a consideration of balances between all interests of parties and anticipate a possible outcome of the main suit. And courts will recognize the necessity to preserve a right if the damage caused by IP infringement is not expected to be fully compensated with only the main lawsuit. Preliminary injunctions are not granted when the right holder’s damage is small compared to the infringer’s damage. For example, the necessity to preserve is more readily accepted if the right holder invests a large amount of money in R&D, or if the technology related to IP is developing rapidly and instigating fierce competition between the parties. The infringer’s intent or negligence is certainly an important factor here as well.
Meanwhile, if the right holder remains indifferent and does not take measures for a considerable period of time despite his awareness of the infringement, it will be difficult to persuade the need to preserve the right. And even more so if the right holder is a foreign national who has not exercised his IP right in Korea.
2. Oral Hearing
Preliminary Injunction Action to IP infringement is handled by a panel of three judges. In general, the right holder has to file a suit with the court that has jurisdiction over infringer’s residence. The court must give a chance for oral hearing in the case of preliminary injunction of IP infringement. As a standard of proof, it requires lower burden of proof than the main civil suit; i.e., it is enough for parties to prove to the extent that the judge may guess it would be certain. Evidence for preliminary actions should be confined within the scope where they can be examined by the court immediately. For example, they can be in the form of documents, samples or witnesses that are readily available for examination at the court. However, for a patent infringement case, courts will usually allow parties to submit experts’ testimonies and presentation of technical matters.
3. IP Owner’s Liability
The party that wins the preliminary action but loses the main suit is liable for the other party’s damages inflicted by exercising the right. The Supreme Court also applies this legal principle to IP cases.[1] Therefore, even if the patentee wins the preliminary action of a patent infringement and/or obtains an expert opinion from a patent attorney or other expert stating that the other party’s act constituted an infringement, the patentee must be liable for the other party’s damage inflicted by exercising the patent right if he loses the main suit.
Furthermore, according to the Supreme Court, an IP owner is liable for compensating other party’s damage if the right holder loses the main suit, if the other party had suffered losses from the cancellation of a contract with his buyer and if the lost was caused by IP owner’s warning to the buyer for criminal liability. In other words, it makes no difference whether or not the IP owner obtains a favorable expert opinion from the Korean Patent Attorney Association (KPAA) before his warning.
[1] Supreme Court case No. 79Da2138, rendered Feb. 26, 1980. In this decision, the Supreme Court ruled that there is no reason to differentiate IP cases from other cases.
POSCO v. Nippon Steel re: Patent Disputes and Invalidity Proceedings in Korea
In 2012, Nippon Steel & Sumitomo Metal (NSSMC) sued POSCO at the Tokyo District Court alleging patent infringements on technology for grain oriented (GO) electrical steel sheets of NSSMC. In the complaint, Nippon Steel also alleged that POSCO infringed trade secrets about GO electrical steel sheets of NSSMC.
Nippon Steel seeks 100 billion yen (approx. US$1 billion) compensation for damages and injunction against manufacture and sale of POSCO’s GO electrical steel sheets. The lawsuit is still pending in the first instance stage.
On the other hand, Nippon Steel filed another complaint to the State Court of New Jersey in April, 2012, too. This case is still pending, too.
Responding the patent infringement lawsuits, POSCO filed invalidity trials challenging validity of 4 patents of Nippon Steel at the Korean Patent Office (IPT of KIPO). Last week, the IPT of KIPO rendered the decision that all claims of one basic patent among the challenged 4 patents should be invalid because those are obvious over the prior art.
Upon receiving the losing decision, Nippon Steel announced by press release that they will immediately appeal the invalidity decision by the IPT of KIPO to the Patent Court.
Criminal Sanction on IPR Infringer
Criminal Sanction on IPR Infringer
Infringement of IP is a crime of trespass of personal property. An infringer may be punished up to 7 years in imprison and/or about US$100,000 fine. It is not uncommon that infringers of IP rights, especially trademarks and trade secrets, have been punished under the Korean criminal law.
To prosecute an infringer of IPR as criminal, an accusation by a proprietor is required. According to the Criminal Procedure Act, the proprietor must accuse an infringer within six months of the date of knowing the infringement and the criminal. The beginning point of the limitation starts from the moment of infringement. Also, the accusation to an infringer will be effective to a corporation as a vicarious liability. An infringer of IPR has been often prosecuted in Korea.
Vicarious Liability on Company
The Patent Act stipulates that the court can punish not only a person who committed an infringement but also a legal entity by imposing fines. The separate accusation against a legal entity is not required because it is not a separate crime from the personal infringer’s. The Supreme Court held that even if the patentee’s request applies only to a person, not to the legal entity, the legal entity may be punished without the expressed accusation of the patentee. This is because the legal entity is liable for the infringement done by its employee.