Hello, I am Eom Sang-yun of Cheongchul Law Firm.

The revised law on the prevention of unfair competition and protection of trade secrets ("Unfair Competition Prevention Act") on January 8, 2019, has relaxed the conditions for recognizing trade secrets so that even if they are maintained as secrets without reasonable efforts, information that is useful for companies' production methods, sales methods, and business activities can be recognized as trade secrets.

If trade secrets are recognized and the Unfair Competition Prevention Act applies, it is possible to utilize remedies against infringement of trade secrets such as prohibition or prevention claims (Article 10), punitive damages (Article 14-2, paragraphs 6 and 7), and claims for credit recovery (Article 12), so it is advisable to meet the requirements for trade secrets to protect one's information assets.

[Elements Recognized for Confidentiality]

Trade secrets consist of three essential requirements: non-disclosure, economic usefulness, and confidentiality management, and what is often contested in practice is confidentiality management. Unlike non-disclosure and economic usefulness, confidentiality management requires certain actions from the holder rather than being judged according to the nature of the information itself. Therefore, even if information is not publicly known and is highly valuable, there is a risk that it may not be protected as a trade secret if sufficient confidentiality measures were not taken.

Consequently, the Unfair Competition Prevention Act amended the requirement for confidentiality management from 'reasonable efforts' to 'reasonable efforts' and later removed the 'reasonable efforts' phrase to relax the recognition criteria. This adjustment also aims to expand the scope of recognition of trade secrets, considering the realities of small and medium-sized enterprises.

However, regardless of the intention behind the relaxation of the confidentiality management requirement, case law holds that at least minimal management actions are necessary to recognize trade secrets. For example, the Seoul Eastern District Court ruled on November 10, 2023, in case 2022No1404 that, “Although the revision of the Unfair Competition Prevention and Protection of Trade Secrets Act no longer requires 'reasonable efforts' for confidentiality preservation, there must still be a certain level of confidentiality management distinct from general information,” clarifying the need for confidentiality management actions.

In particular, the aforementioned ruling states, “The fact that the victim company has installed fingerprint recognition devices and CCTV is a measure to control access by outsiders and prevent criminal or accident occurrences, and cannot be seen as a measure to restrict access to specific documents classified as trade secrets,” and that “the ‘prohibition of disclosure of trade secrets’ clause stipulated in the company’s employment regulations is merely a general, abstract clause.” Thus, it judged that it is difficult to assert that materials such as price lists were kept secret.

This ruling provides indications for many companies holding sensitive business information, indicating that mere facilities installed for access control (such as fingerprint recognition devices, CCTV, etc.) or vague internal regulations or security agreements may not sufficiently ensure the recognition of confidentiality management.

[Breach of Duty in Business May Be Recognized]

Case law determines that even if something does not qualify as a trade secret, if the information has not been disclosed to the public, and cannot be obtained without going through the holder, and that the holder has invested considerable time, effort, and costs to acquire or develop the information to gain a competitive advantage through its use, it is considered a 'significant business asset', and without permission extraction of such information constitutes a breach of duty in business (see judgment 2010Do3043, etc.).

Thus, even if it does not fall under trade secret infringement, it cannot always be regarded as innocent, and recognition of non-disclosure and economic usefulness alone can lead to criminal liability for breach of duty in business. However, in such cases, the victim company would not be able to utilize remedies under the Unfair Competition Prevention Act beyond criminal penalties and claims for damages, which may not be sufficiently proactive measures.

Therefore, following the amendments to the Unfair Competition Prevention Act, it is necessary to analyze case law examples and take at least minimal management measures required for trade secret recognition.

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