Hello, I am Attorney Eom Sang-yoon from Cheongchul Law Firm.
Today, I will discuss defense industrial technology related to trade secret leaks.
[Question]
Can the Defense Industry Technology Protection Act not be applied to technologies not designated as defense industrial technology?
[Answer]
No one may acquire, use, or disclose defense industrial technology by improper means, and if this is violated, one may be punished under the 'Defense Industrial Technology Protection Act' ("Defense Technology Protection Act").
The Defense Technology Protection Act stipulates that ‘defense industrial technology’ refers to technologies that are designated and announced by the Director of the Defense Acquisition Program Administration as those that need to be protected for national security among defense science and technology related to the defense industry, and under this law, ‘Defense Industrial Technology Designation' includes 128 technologies across eight major fields (25 sensors, 37 information and communication technologies, 13 control electronics, 17 ammunition/energy technologies, 10 propulsion technologies, 10 chemical and biological defense technologies, 4 materials, 12 platforms/structures) as of June 15, 2023.
Furthermore, the Defense Technology Protection Act has provisions that enhance penalties for violators compared to the Unfair Competition Prevention Act and so on.
Article 21 of the Defense Technology Protection Act ① A person who commits acts falling under Article 10, Items 1 and 2 for the purpose of using defense industrial technology in foreign countries shall be punished with imprisonment for not more than 20 years or fines not exceeding 2 billion won. ② A person who commits acts falling under Article 10, Items 1 and 2 shall be punished with imprisonment for not more than 10 years or fines not exceeding 1 billion won. ③ A person who commits acts falling under Article 10, Item 3 shall be punished with imprisonment for not more than 5 years or fines not exceeding 500 million won. ④ A person who leaks or appropriates secrets in violation of Article 19 shall be punished with imprisonment for not more than 7 years, not exceeding 10 years deprivation of qualifications, or fines not exceeding 70 million won. ⑤ The property obtained by a person who has committed the crimes specified in paragraphs 1 to 3 shall be confiscated. However, if all or part of that property cannot be confiscated, its value shall be recovered. ⑥ Attempts of the crimes specified in paragraphs 1 and 2 shall be punished. ⑦ The sentences of imprisonment and fines for paragraphs 1 to 3 may be imposed concurrently. |
Meanwhile, lower court precedents have determined that even if a defense contractor leaks technical data it possesses, it does not constitute a violation of the Defense Technology Protection Act if it is unclear whether the technical data corresponds to the technology designated and announced by the Director of the Defense Acquisition Program Administration, and if the Director has not declared it as defense industrial technology.
Changwon District Court Case No. 2021GoDan3191 Defense industrial technology refers to technologies that are to be protected for national security among defense science and technology related to the defense industry, as designated and announced by the Director of Defense Acquisition Program Administration under Article 7 [Defense Technology Protection Act (hereinafter referred to as ‘Defense Technology Protection Act’) Article 2, Item 1]. The Director of the Defense Acquisition Program Administration designates defense industrial technology after deliberation by the Defense Technology Protection Committee (Defense Technology Protection Act Article 7, Paragraph 1), and in selecting the defense industrial technologies to be designated, it must comprehensively consider the effect of the technology on national security and the research trends in that field and select within the necessary minimum range (Paragraph 2 of the same article). (…) Companies that possess defense industrial technology or conduct research and development projects related to defense industrial technology may apply to the Director of the Defense Acquisition Program Administration for a judgment as to whether the technology they possess corresponds to defense industrial technology (Defense Technology Protection Act Article 7, Paragraph 6), and at this time, must attach materials regarding the characteristics, uses, and performance of the technology they possess, as well as any additional explanatory materials necessary for the determination of defense industrial technology (Enforcement Decree of the Defense Technology Protection Act Article 13, Paragraph 1). The Director of the Defense Acquisition Program Administration must make a determination as to whether the technology is defense industrial technology within 15 days of receiving the application and notify the applicant of the result in writing. However, if a separate technical review is required, the period for technical review is not included in the above 15 days, and if the technology is determined to be defense industrial technology, the Director of the Defense Acquisition Program Administration must issue a defense industrial technology certification to the applicant (Enforcement Decree of the Defense Technology Protection Act Article 13, Paragraphs 2 and 4). The police, in November 2020, requested the Defense Acquisition Program Administration to determine whether the C Integrated Yanggang Mast Electric Drive System technology corresponds to defense industrial technology, and the Defense Acquisition Program Administration requested a technical review from the Defense Technology Quality Agency. The Defense Technology Quality Agency submitted a review opinion stating that 'the C Integrated Yanggang Mast Electric Drive System technology is a drive technology that raises and lowers individual equipment and is a general motor technology, and in terms of technology, the difference from civilian technology is not great, and compared to the level of advanced countries in the mast field, the domestic technology level is low, and it is judged that the impact on national security is not large' (Evidence Record Volume 2, Pages 157 to 159), based on which the Defense Acquisition Program Administration replied on December 23, 2020, that this integrated Yanggang Mast Electric Drive System technology does not correspond to defense industrial technology. The Defense Science Research Institute, regarding paragraph ⑤, only replied that ‘it is difficult to clearly select which field the Integrated Yanggang Mast Electric Drive System technology corresponds to in this announcement, but it may be included in terms of broadly considering marine structural optimization technology (considering the aspect of minimizing installation space) and platform drive system technology (considering that the mast is also a component of the platform)’ (Evidence Record Volume 2, Page 178). Furthermore, the Defense Science Research Institute noted at the bottom of the review opinion, ‘This technical review was prepared based on information provided by your organization to assist in your operational handling. Therefore, in the event of legal issues such as investigation, audit, or litigation, the results of this review do not guarantee relevance to the respective case’ (Evidence Record Volume 2, Page 178). (…) The charges stated are such that if there is no proof of the crime, it should be ruled not guilty according to the latter part of Article 325 of the Criminal Procedure Act, but since it acknowledges the charge of breach of trust in concurrent relation 4, it does not separately rule not guilty in the order. |
‘Defense Industrial Technology Designation Announcement’ classifies defense technology by type. However, in practice, there may be cases where it is unclear whether a specific technology corresponds to defense industrial technology, and in such cases, the judgment of the Defense Acquisition Program Administration is required. Thus, Article 7, Paragraph 6 of the Defense Technology Protection Act provides that an application may be made to the Director of the Defense Acquisition Program Administration for a determination of which technologies correspond to defense industrial technology, and it seems that this point was also considered in the trial process of the aforementioned ruling.
Therefore, in principle, technologies that are clearly not designated as defense industrial technology cannot be protected under the Defense Technology Protection Act, and the applicability of the Defense Technology Protection Act may vary depending on the Director's determination for technologies whose applicability is unclear. From the perspective of defense contractors, it is essential to classify and manage sensitive materials such as defense industrial technologies among trade secrets, so it may be worthwhile to consider an application for determination regarding technologies where the applicability is unclear.
However, even if the Defense Technology Protection Act does not apply, acts of leaking technical data of defense contractors may correspond to breach of trust. And if the relevant data is managed as confidential and fulfills the requirements of trade secrets, it may also be subject to the application of the Unfair Competition Prevention Act.
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