Article 14-2 of the Unfair Competition Prevention Act (Presumption of Damages, etc.)

① When a party whose business interests have been infringed by unlawful competitive acts, acts that violate Article 3-2 Paragraph 1 or 2, or acts of trade secret infringement claims damages under Articles 5 or 11, that party may calculate the total amount of damages as the sum of the amounts corresponding to each of the following items when delivering items that caused said competitive infringement acts:

1. The quantity of the delivered item (excluding the quantity that could not be sold due to causes other than the competitive infringement acts) multiplied by the profit amount per unit that the party could have sold had there been no competitive infringement acts, not exceeding the quantity that is not more than the difference between the quantity of items that could have been produced by the injured party and the actual quantity sold.

2. If there is a quantity of items delivered that exceeds the number of items that the injured party could have produced minus the actual number sold, or if there is a quantity that could not be sold due to reasons other than competitive infringement acts, for those quantities, the amount that the injured party could reasonably have received if competitive infringement acts had not occurred.

② When a party whose business interests have been infringed by unlawful competitive acts, acts that violate Article 3-2 Paragraph 1 or 2, or acts of trade secret infringement claims damages under Articles 5 or 11, if the infringing party has benefited from the infringement, the amount of profit shall be presumed to be the damages of the party whose business interests have been infringed.

③ A party whose business interests have been infringed by unlawful competitive acts, acts that violate Article 3-2 Paragraph 1 or 2, or acts of trade secret infringement can claim damages corresponding to the usual amount that could be reasonably received for the use of labels or trademarks on goods that were subject to competitive infringement acts or the use of trade secrets that were subject to trade secret infringement.

④ If the amount of damages due to competitive infringement acts, acts that violate Article 3-2 Paragraph 1 or 2, or acts of trade secret infringement exceeds the amount prescribed in Paragraph 3, the party can claim damages for that excess as well. In this case, if the party who infringed business interests has no intention or gross negligence, the court may consider this when determining the amount of damages.

⑤ The court may recognize that damages have occurred in lawsuits regarding competitive infringement acts, acts that violate Article 3-2 Paragraph 1 or 2, or acts of trade secret infringement, but if it is extremely difficult to prove the necessary facts to substantiate the amount of damages due to the nature of those facts, it may recognize a reasonable amount of damages based on the overall intent of the arguments and the results of the evidence investigation, notwithstanding the provisions of Paragraphs 1 through 4.

⑥ If the act of competitive infringement or trade secret infringement is recognized as intentional, the court may determine damages not to exceed five times the amount recognized as damages under the provisions of Paragraphs 1 to 5 of Article 14-2, notwithstanding Articles 5 or 11.

⑦ In determining the compensation amount under Paragraph 6, the following factors should be considered:

1. Whether the infringer has a superior position

2. The degree of intention or awareness of the risk of damage

3. The scale of damage suffered by the trade secret holder due to infringement

4. The economic benefit obtained by the infringer due to the infringement

5. The duration and frequency of the infringement

6. Fines related to the infringement

7. The financial status of the infringer

8. The degree of efforts made by the infringer to mitigate damage

Seoul High Court Decision No. 2022Na2000898, 2022Na2000904, May 18, 2023

-       It is difficult to accurately calculate the profit that J gained from infringing the plaintiff's trade secrets based only on the evidence submitted by the plaintiff. Therefore, Article 14-2 Paragraph 2 of the Unfair Competition Prevention Act cannot be applied.

-       Article 14-2 Paragraph 5 of the Unfair Competition Prevention Act states that while it is acknowledged that damages have occurred, if it is extremely difficult to prove the necessary facts to substantiate the amount of damages due to the nature of those facts, it is provided that a reasonable amount of damages can be recognized based on the overall intent of the arguments and the results of the evidence investigation. This aims to realize the ideal and function of a damage compensation system, which is to equitably and fairly distribute damages by reducing the burden of proof and the level of evidence required.

-       The defendants established a children's clothing business unit by joining in August 2016 and used the plaintiff's trade secrets to launch 'K', and in 2016, they manufactured and sold only fall and winter children's clothing, and there is a significant causal relationship between the defendants' infringement of the trade secrets and the decrease in the plaintiff's sales due to the sales of K by J in 2016.

-       Although it appears that the defendants did not produce and sell products using the plaintiff's trade secrets exactly as they were, but rather sold products that were produced after some modifications in size or design, the overall design recorded in the product planning document and design directive of the trade secret is a significant part of the children's clothing produced by J, and it seems that the contribution of the plaintiff's trade secrets to J's net profit is considerable.

-       It is deemed appropriate to set the amount of damages due to the defendants' trade secret infringement related to J's 2016 sales at 50,000,000 won.