Hello, I am Attorney Eom Sang-yun from the law firm Cheongchul.

If a company's materials that constitute trade secrets are leaked, you may be punished under the 'Act on the Prevention of Unfair Competition and Protection of Trade Secrets' (Unfair Competition Prevention Act). However, even if the material does not constitute a trade secret, leaking materials necessary for the management of the company may still be considered embezzlement in the course of duty.

Today, we will look into the relationship between the infringement of trade secrets and the crime of embezzlement.

[Question]

Is there a possibility of criminal punishment even for leaking or using company materials that are not trade secrets for personal use?

[Answer]

According to the Unfair Competition Prevention Act, even if the materials are not considered trade secrets, actions that leak materials that are major assets in the company’s business may be punished as embezzlement under Article 356 of the Criminal Code, with imprisonment for up to 10 years or a fine of up to 30 million won.

The crime of embezzlement is established when a person handling someone else's affairs acts contrary to their duties, gaining property benefits for themselves or enabling a third party to obtain such benefits, thereby causing damage to the principal. Therefore, if an employee who has sworn not to leak the company's trade secrets leaks them to a competing company for economic gain, it constitutes a breach of trust with the company and constitutes embezzlement (Supreme Court ruling 2004Do714 and others). Furthermore, regarding the situation where the principal suffers damage, it also includes cases where there is a risk of damage, so even if the amount of damage is not specifically or clearly determined, it does not affect the establishment of embezzlement (Supreme Court ruling 2000Do2914 and others).

Meanwhile, trade secrets are not publicly known and have independent economic value, referring to production methods, sales methods, or other technical or managerial information useful for business that is managed as a secret (Article 2, Section 2 of the Unfair Competition Prevention Act). Jurisprudence has also judged that if the material has not been disclosed to the public and is considered 'a major asset for business' created with significant time, effort, and costs by the user, then the act of leaking that material also constitutes embezzlement (Supreme Court ruling 2008Do94733 and others). In other words, even if it is claimed that the secrecy requirement is denied due to not being managed as a secret among the requirements for trade secrets (non-disclosure, economic usefulness, and secrecy), the act of leaking the material may still be considered embezzlement.

Moreover, even if the act of legally exporting trade secrets or materials that are major business assets does not constitute embezzlement, if one has an obligation to return or dispose of those trade secrets upon leaving the company, and fails to do so by leaking the information to competing companies or using it for their own benefit, such actions would still constitute embezzlement (Supreme Court ruling 2006Do9089 and others).

Furthermore, for the same act of infringing trade secrets, both violation of the Unfair Competition Prevention Act and embezzlement may be recognized concurrently, and their relationship is considered imaginary competition (Supreme Court ruling 2004Do6876).

However, the fact that the court acknowledged embezzlement using the concept of 'major business assets' implies that the previous Unfair Competition Prevention Act required substantial or reasonable efforts to maintain and manage secrecy for it to be considered a trade secret. This interpretation serves to supplement situations where the secrecy requirement is not met, meaning punishment under the Unfair Competition Prevention Act could not be applied. Since the current Unfair Competition Prevention Act does not require substantial or reasonable efforts for the management of secrecy, there exists an academic opinion that suggests the practical benefits of separately recognizing embezzlement are minimal.

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