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 Misappropriatio

(1) Injunctive Relief -

(2) Damages

A. Actual loss (including lost profits where applicable),

B. Unjust enrichment, and/or

C. Reasonable royalties.

(3) Criminal Sanctions

 

[Patent Infringement Litigation in Korea - 6] Litigation Costs and Attorney Fees

Official fees for a preliminary injunction action or a permanent injunction action would be small rather than significant. Those would be about US$500. A lawsuit to the Patent Court is an administrative lawsuit that seeks to review the decision of the IPTAB of KIPO. Official fee for such action to the Patent Court would small, too. That is about US$500.

As to a lawsuit for damage compensation, official fees are correlated with the amount of claims. For the first instance lawsuit, a plaintiff must pay 0.5% of claimed amount as official fee. Accordingly, it could be considerable amount.

In terms of attorney fees, two options are usually used in Korea; Flat fee in lump sum or hourly charge based on actually spent time. Considering the unpredictable nature and complexity of patent infringement litigation, it is difficult to estimate the total cost of litigation. Just as a rough estimate, it would be approximately US$200,000 ~ 500,000 for a district court action for a straightforward litigation case. In a big case with complex and difficult technology issues, it may cost much more. In addition, translation of court documents into English will increase costs accordingly.

Korean laws allow the prevailing party to claim court costs and legal fees from the losing party. Official fees and legal costs paid to a court are usually reimbursed in full to the prevailing party. As to attorney fees, however, the Supreme Court has a regulation that limits the reimbursement of actual attorney fees. For instance, for a PI case, a prevailing party may recover about US$5000 per instance from a losing party; not more than US$10,000 in total. However, the amount for damage lawsuit is correlated with the amount of claim and ration of winning. That may be quite different. At any way, it is safe to assume that the amount as a reimbursement of legal fees could be substantially less than the actual cost.

[Patent Infringement Litigation in Korea - 5] Injunction

Permanent Injunction

An IP right owner will seek to enjoin an infringer at the beginning of a lawsuit through preliminary injunction. The nature of a patent right is the right to exclude others. Once the patent has been held valid and infringed, the patentee is entitled to the full enjoyment and protection of the patent right. The infringer shall not be allowed to continue his infringement.

Under Korean patent law, when the infringement of a patent is found, a permanent injunction shall be automatically granted. Only in extraordinary circumstances like patent misuse or substantial injury to the public interest may a court deny a permanent injunction.

Preliminary Injunction (PI)

Preliminary injunction is drastic and extraordinary remedy. Thus, a court allows preliminary injunction only in extraordinary circumstances. PI may be allowed when the circumstances are met by showing a reasonable likelihood of success on the merits, the existence of irreparable harm to the patent owner if a PI is not granted; the balance of hardship between the patent owner and the infringer. Further, a PI should not be against the public interest.

PI is often granted to a patentee in Korea. Under Korean patent law, the validity of a patent and its enforceability are presumed and further irreparable harm is presumed where there is reasonable likelihood of success. Therefore, preliminary injunction shall be granted when the accuser’s infringement is proved.

In contrast, in case a patentee has not practiced the patented invention within Korea, preliminary injunction will not be allowed because no irreparable harm is presumed. Further, in case it is probable that the subject patent will be invalid through invalidation proceeding, it will be hard for the patentee to obtain PI. Preliminary injunction may give full and final satisfactory remedy in advance before a main lawsuit, and can cause significant suffering to the other party. Accordingly, a PI case shall be carefully decided by a panel of three judges.

 

[Patent Infringement Litigation in Korea - 4] Patent Infringement Litigation Procedures

 1. Complaint and Answer

A patentee may initiate a lawsuit by filing a complaint that includes the parties’ information, prayer of remedy and grounds why the defendant is liable to the plaintiff. The plaintiff may seek a court granting an order of barring the opposing party’s infringing manufacturing, marketing and selling activities; the seizure or destruction of all finished or half-finished infringing products in the opposing party’s possession and compensation for damages.

 

The defendant may submit a written answer to deny or accept the complaint within 30 days of being served the complaint. Furthermore, the defendant may file a counterclaim. But, due to bifurcated system about independent invalidity action, the defendant may not file a counterclaim to invalidate the subject patent.

 

2. No Discovery like the US type is available.

 

3. Briefs and Evidence as Exhibits

 

After the court has served the answer to the plaintiff, the parties are required to exchange briefs and exhibits. Each party may object to those exhibits that are irrelevant or inappropriate. The plaintiff ordinarily files his briefs at first, and then the defendant files his briefs in turn. A court may allow the parties having another opportunity to exchange briefs before a preparatory oral hearing which is a kind of scheduling meeting. The court usually permits a 3~4 weeks period for each brief filing. The court usually rules on the admissibility of the objected exhibits in the oral hearing.

 

4. Oral Hearing

 

In the first oral hearing, the court will allow parties submitting their arguments and evidence and then will arrange the disputed facts and issues between parties. Through briefs, parties will provide the court with the nature of the controversy, evidence, legal contentions that the parties believe support their positions. The court will decide what issues are presented by both parties and how the case will proceed. It is likely for parties to have two or more oral hearings in patent infringement case.

 

5. Evidence

 

Korea does not have discovery procedures and jury trials. All lawsuits are tried by judges. Because judges are skilled in the rules of evidence, judges are usually lenient in allowing evidence to be introduced.

 

A. Document Request

 

Each party can request the court to order the other party to submit relevant documents in issues. The party having the document must submit the document to the court. The court can enforce this order by monetary sanctions and evidentiary sanctions. Evidentiary sanctions include not allowing responding party’s submission of the evidence for his benefits, and more importantly may regard the requesting party’s assertion as true. The document request is not applicable to attorney client privilege documents, attorney work products and confidential information.

 

B. Protective Order

 

In case a party insists the document is private, trade secret, or others, the court may order the party to submit the document and then examine without the other party’s participation. Hence it is not permitted for a respondent to refuse document submission for trade secret reasons. Only the party may seek court’s protective order on his information.

 

C. Expert Opinion

 

The parties can retain experts to testify on their behalf. The party applying for expert opinion should submit expert candidates and manner of expert opinion, and further should pre-pay the cost. If the party applying for expert opinion wins the case, the prevailing party will recover the cost from the losing party. Patent cases need prudent expert opinions that usually need considerable time and cost.

 

D. Court Inspection

 

Court inspection is adopted for judges to examine and analyze actual objects using the five senses of judges. The court inspection can be the most powerful means for proof if judges recognize the nature and contents of the subject evidence adequately. For example, judges may compare patent’s product with infringer’s product through watching experimentations or seeing or touching by themselves. Though ordinarily it is not easy for judges to comprehend the technical peculiarity through court inspection, the court often allows parties court inspection.

 

E. Special Hearing for Technical Issues (Markman Hearing)

 

A court usually set an oral hearing for examining technical features. Both parties may present technical issues including background technology, claimed inventions, elements of the invention and comparison of elements between the patented invention and the accused product or process. Parties are permitted to use drawings, documents, power point presentations, models, real products, demonstrations, and others. It is one of the most important proceedings for parties to be able to have an influence on judge’s decision.

 

F. Witness Examination

 

The party who calls a witness will conduct the first examination of the witness. The direct examination shall be done by using open-ended questions. For instance, any leading questions, which allow only for a “yes” or “no” answer, are not allowed. The opposing attorney has a chance to cross examine the witness and he is allowed to use leading questions: cross examination. But the cross examination shall be limited to the subject matter raised during the direct examination. When the opposing attorney has finished his cross examination, the attorney who did direct examination has an opportunity to conduct redirect examination. The attorney again cannot use leading questions.

 

Parties may submit an affidavit as documentary evidence for direct examination of a witness. In the oral hearing, only crucial points of the affidavit are examined and other details can be omitted in that direct examination. Accordingly, sufficient time is allotted for cross-examination. When a witness is hostile and is not under the influence of the requesting party, the party may file a motion that the witness must be summoned and when the motion is accepted the party must submit main contents for direct examination in advance.

[Patent Infringement Litigation in Korea - 3] Check Points & Actions Must Be Considered Before Enforcement Actions

Patented claims must be valid and infringed in theory. However such claims are not common in reality. Accordingly a patentee must check strength of his patent before enforcing his patent against accused infringers. To be a valid patent claim, it should be strong enough to sustain invalidity challenges. The scope of the claim must be narrow enough to be novel and non-obvious over the prior art. On the other hand, a claim should be infringed by the competitor’s product or process. For this purpose, the scope of a claim must be broad enough to cover competitor’s product or process. These are contradictory and it is really hard to achieve desirable balance between two opposites.

 

Before filing a patent infringement lawsuit, it is desirable for a patentee to check strength of each patented claim based on thorough prior art search. Usually, it is necessary to fix any errors in issued patents, protect claims from possible invalidity challenges through amending claims to be novel and non-obvious over the prior art; and further pursue claims directed to competitor’s products or process if possible.

 

Two ways are available to amend patented claims after granting a patent in Korea. Before a patent infringement action, a patentee may amend claims as precautionary measure through ex parte proceeding at the IPT of KIPO. Namely, the first way is an independent petition to request amendment as like re-issue request in the U.S. Actually, Korea use a different terminology of “correct” for granted patents rather than “amend” for pending application before grant. It is to differentiate from each other because two terms do not have the same meaning.

The second option to amend a patented claim is correlated with an invalidity proceeding. During invalidity proceeding, a patentee may request to amend granted claims as a defense. It is very common to file a motion to correct patents during invalidity proceeding. This is inter partes proceedings between a patentee and a challenger and consolidated in invalidity proceeding. Both parties may argue whether or not such amendment to be allowed.

 

A patentee may amend granted claims of a patent within the scope of original disclosure and within the scope of protection of the patent as granted. In reality, post grant corrections of claims are allowed within a very limited scope. The correction must be made to (1) narrow a claim, (2) correct typological errors, or (3) clarify ambiguous description. The correction must not broaden or alter the scope of the patent right.