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

Many companies enter into Non-Disclosure Agreements (NDAs) to prevent the leakage of trade secrets. However, if either party to the contract violates the NDA, it may be necessary to seek remedies such as injunctions or claims for damages.

Today, I will introduce a case where an injunction against the infringement of trade secrets was granted based on an NDA.

[Background of the Case]

The creditor A is an information and communication-related company, with its CEO being the patent holder, and the debtor B is a company providing early childhood learning content utilizing artificial intelligence. A entered into a service contract with B while pursuing an AI-based chat platform business, which included a confidentiality clause stipulating that the contractor (B) could not disclose information acquired from the client (A) and had a confidentiality obligation for 5 years from the termination or expiration of the contract.

Subsequently, B developed and provided the inference engine, which was the result of this service contract, to A. However, B posted content on its website's 'Owned Technologies' section allowing the experience of a translator capable of translating into 14 languages, including the deliverables from this service.

In response, creditor A applied for an injunction against the infringement of trade secrets, alleging that B disclosed and used related information or technology despite being obligated to comply with confidentiality under the service contract.

[Court's Judgment]

The court ruled that 'the general conditions of the service contract impose a confidentiality obligation on debtor B not to disclose 'information obtained in connection with the service contract or its contents' to outsiders until 5 years have passed from the termination or expiration date of the service contract, and that the information or technology in question corresponds to the service deliverables themselves, the technology used, the website post wherein such deliverables can be experienced in the form of a translator, and the website post containing the counterpart to the service contract and such information technology, which falls under the confidentiality obligations of the general conditions of the service contract.' Thus, the court recognized A's protected rights.

Furthermore, the court noted that 'in a situation where no company occupies a leading position in the multilingual chat platform service market, if B discloses or uses such information or technology, A may face disadvantages in competitive business, resulting in damages that are difficult to compensate monetarily.' Therefore, the necessity for protection was also acknowledged.

Accordingly, the court issued an injunction prohibiting B from disclosing or using information or technology related to the service contract to parties other than A.

[Implications of the Judgment]

This ruling acknowledges the confidentiality obligations regarding the deliverables developed by the contractor based on the service contract between A and B, prohibiting their disclosure or use. This highlights the increased necessity of adding confidentiality clauses or entering into separate NDAs when entering into service contracts. Additionally, to exclusively benefit from the deliverables of the service contract, it is essential to clarify not only the confidentiality obligations but also to whom the rights to those deliverables belong.

However, to utilize these legal measures, the contract content must be explicit. In the aforementioned case, the service contract between A and B designated 'information obtained in connection with this contract or service content' as confidential information. To clarify further, it is necessary to enter into a separate NDA and specify the deliverables as subjects of the confidentiality obligation.

Moreover, it is prudent to contract for measures such as obtaining confidentiality agreements from third parties, including employees and subcontractors involved in the service work. In the cited case, there was a company C involved in the development besides B, and the request for an injunction against C by A was dismissed on the grounds that 'there is insufficient evidence to conclude that debtor C agreed to bear the confidentiality obligation to A.' Therefore, from the client's perspective, it is important to consider the possibility of subcontractors existing and to structure the contents of the service contract and NDA accordingly.

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