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

The law on the prevention of unfair competition and the protection of trade secrets ("Unfair Competition Prevention Act") protects trade secrets, and in order for certain information to qualify as a trade secret, it must meet the criteria of ① non-disclosure, ② economic utility, and ③ confidentiality. Practically, confidentiality is often the main point of contention, and the Unfair Competition Prevention Act may not apply if the requirements for a trade secret are not met.

Then, if confidentiality is denied, is there no criminal punishment? Today, let’s explore the relationship between trade secret infringement and breach of duty.

[Question]

I understand that if someone leaks a trade secret, they will be punished for violating the Unfair Competition Prevention Act.

So, can an employee who leaks company information that does not qualify as a trade secret be criminally punished?

[Answer]

In order for information to be classified as a trade secret, it must meet the criteria of ① non-disclosure, ② economic utility, and ③ confidentiality, where confidentiality means that it is managed in a way that the fact of being kept secret can be recognized objectively.

In real cases, the primary contention usually lies with confidentiality among the requirements for trade secrets, and it is often denied that it qualifies as a trade secret due to insufficient evidence of being objectively maintained as a secret.

However, case law states that “even if it is not a trade secret, if the information has not been disclosed to the public in general and is a significant business asset created with considerable time, effort, and cost by the user, the act of exporting that information constitutes breach of duty” (2011Do946, etc.). Therefore, even if a company's employee legally exports significant business assets, if they do not return or dispose of the trade secrets upon leaving the company, even when they are obligated to do so, but instead leak it to a competitor or use it for their benefit, such actions will constitute a breach of duty (if both breach of duty and trade secret infringement apply, case law views the relationship as imaginary concurrence, punishing with the heavier penalty (2008Do9169)).

In other words, even if the leaked information does not meet the requirements such as confidentiality and does not qualify as a trade secret, the act of leaking that information can still be considered a breach of duty. However, for a breach of duty to be established, there must be a financial loss to the company as a result of the breach (including cases where there is a risk of loss), therefore it may require more evidence than trade secret infringement, which does not require the occurrence of loss.

If it qualifies as a trade secret, provisions such as damage estimation under the Unfair Competition Prevention Act (Article 14-2), injunctions (Article 10), and confidentiality orders (Article 14-4) can be utilized, but if it does not qualify as a trade secret, the Unfair Competition Prevention Act does not apply. Therefore, from the company’s perspective, it is necessary to engage in confidentiality management to ensure that the Unfair Competition Prevention Act is applicable. Even if recent revisions to the law do not require substantial or reasonable efforts for confidentiality management, if no actions to maintain confidentiality are recognized, it will be difficult to acknowledge it as a trade secret.

Cheongchul Law Firm is a corporate-oriented firm established by attorneys from the four major law firms, providing comprehensive solutions for trade secrets, intellectual property rights, and more. If you have any further inquiries, please feel free to contact us via email or phone.