Hello, this is Attorney Eom Sang-yoon of Cheongchul Law Firm.

Trade secrets, which constitute core corporate assets, are frequently leaked externally on occasions such as employee departures or the termination of contracts with outside partners. Previously, only acts of acquiring, using, or disclosing trade secrets for improper purposes were subject to criminal punishment. However, the Unfair Competition Prevention and Trade Secret Protection Act (the "Unfair Competition Prevention Act") was amended on January 8, 2019, to newly establish "continued possession of trade secrets after a demand for deletion or return" as a separate punishable offense.

The issue is whether conduct in which the holder received a deletion or return demand prior to July 9, 2019 (the effective date of the punishment provision), but continued to possess the trade secret after that date, may be punished. Lower courts were divided on this issue until the Korean Supreme Court, in its judgment dated April 30, 2026 (Case No. 2025Do21522), provided clear guidance. Today, we examine the key findings of this judgment and the practical implications for corporate legal practice.

Background and Elements of the Newly Added Punishment Provision

The former Unfair Competition Prevention Act (before its amendment by Act No. 16204 of January 8, 2019) provided in Article 18(1) for the punishment of acts such as "acquiring, using, or disclosing trade secrets to third parties with the purpose of obtaining improper gain or causing damage to the trade secret holder, while knowing that the trade secret will be used abroad or is likely to be used abroad," but had no separate punishment provision for the act of continuing to possess a trade secret, which had been lawfully obtained, after receiving a demand for deletion or return from the holder.

To fill this gap in punishment, the Unfair Competition Prevention Act, as amended on January 8, 2019, and effective from July 9, 2019, newly established Article 18(1)1(c), which provides as a separate offense "the act of continuing to possess a trade secret with the purpose of obtaining improper gain or causing damage to the trade secret holder, while knowing that the trade secret will be used abroad or is likely to be used abroad, after receiving a demand from the trade secret holder to delete or return the trade secret."

For conduct of continued possession to be punishable under the amended Act, all four elements must be satisfied: (i) the "purpose" of obtaining improper gain or causing damage to the trade secret holder; (ii) "knowledge" that the trade secret will be used abroad or is likely to be used abroad; (iii) that a "demand for deletion or return" of the trade secret was received from the holder; and (iv) "continued possession" of the trade secret.

The Korean Supreme Court's Decision in 2025Do21522

In this case, the defendants were indicted for violation of the Unfair Competition Prevention Act (Foreign Disclosure of Trade Secrets) on the basis that they had continued to possess trade secrets despite a deletion demand from Company A, the trade secret holder. The issue was whether the defendants could be punished under the newly added provision for continuing to possess the trade secrets after July 9, 2019, even though Company A's deletion demand had been made before that effective date.

The lower court found the defendants guilty for the following reasons:

1. Violation of the newly added Article 18(1)1(c) of the Unfair Competition Prevention Act is a "continuing offense" in which the criminal conduct continues for as long as the state of possessing the trade secret persists.

2. The constituent act under that provision is "continuing to possess the trade secret," and "receiving a demand for deletion or return of the trade secret from the holder" merely describes the status or capacity of the defendant.

3. Accordingly, it is not required that the deletion or return demand be made after the effective date of the amended Act for the act to be punishable.

However, the Korean Supreme Court clarified that the Unfair Competition Prevention Act establishes both "receiving a demand from the trade secret holder for deletion or return of the trade secret" and "continuing to possess the trade secret" as elements of the offense under that provision. In other words, the demand for deletion or return is not a mere status or capacity of the actor, but rather a substantive element of the offense that serves as a prerequisite for punishment.

The Court emphasized that, under the principle against retroactive application of criminal statutes set forth in the first sentence of Article 13(1) of the Constitution and Article 1(1) of the Criminal Act, together with Article 1 of the Addenda to the Unfair Competition Prevention Act, only conduct occurring after the effective date of the punishment provision may be punished. The Court ruled that punishing conduct in which the holder received a deletion or return demand before the effective date and continued to possess the trade secret violates the principle against retroactive application of criminal statutes, and the continuation of such possession past the effective date does not alter this conclusion.

Practical Implications

This judgment provides significant guidance for trade secret disputes by clearly defining the temporal scope of the newly added punishment provision under the Unfair Competition Prevention Act.

First, trade secret holders should clearly recognize that the timing of the deletion or return demand is the critical factor determining whether punishment is available. If a deletion or return demand was made only before July 9, 2019 (the effective date of Article 18(1)1(c) of the Unfair Competition Prevention Act), criminal punishment under that provision is not available even if the counterparty continues to possess the trade secret thereafter. In such cases, it is necessary to issue a fresh, clear demand for deletion or return so that the timing can be objectively proven. Sending such demands by certified mail ("naeyongjeungmyeong") to clearly document the date and content of the demand allows the timing requirement for punishment to be readily established in any subsequent criminal complaint.

On the other hand, employees, partner companies, and others who possess trade secrets should be aware that, even if they failed to comply with a deletion or return demand received before the effective date, this alone does not constitute a violation of Article 18(1)1(c) of the Unfair Competition Prevention Act. However, this judgment by no means grants blanket immunity for the continued possession of trade secrets. Criminal liability may still arise where (i) a new and separate deletion or return demand is made after the effective date; (ii) the trade secret is "used" or "disclosed" while in the person's possession; or (iii) the trade secret was improperly acquired for the purpose of obtaining unjust gain.

Furthermore, even where a violation of the Unfair Competition Prevention Act is not established due to the principle against retroactivity, occupational breach of trust may still be established. Concluding that no punishment will follow on the basis of this judgment alone is therefore unlikely to be a sound assessment.