Hello. This is Attorney Shin Joon-sun from the Law Firm of Cheongchul.

In the last blog, we looked at cases of disputes arising from technology theft. As these acts of technology appropriation increase, the amending of the Act on Promoting Cooperative Cooperation between Large and Small Enterprises (hereinafter referred to as the "Cooperative Law") and the Act on Fair Transactions in Subcontracting (hereinafter referred to as the "Subcontracting Law") in the first half of 2024 has raised the limit for punitive damages for technology appropriation acts to five times. On September 10, 2024, the amendment that introduced the right to claim an injunction against the appropriation of technical materials was passed in the State Council, thus legal sanctions against technology appropriation are becoming significantly stricter.

In particular, the introduction of the right to claim an injunction is noteworthy as it has improved the situation where, despite suffering from technology appropriation, small and medium-sized enterprises lacked means to prevent the spread of damage until administrative measures from the Ministry of SMEs or a court's ruling on damages was received based on a report to the Fair Trade Commission under the Subcontracting Law. In this blog, we will look at the content of the newly introduced right to claim an injunction and practical countermeasures.

[Question] What are the main contents and practical countermeasures of the right to claim an injunction introduced by the Cooperative Law?

[Answer]

1. Background for the Introduction of the Right to Claim Against Technology Appropriation

Until now, the Ministry of SMEs has strengthened ex-post remedies such as enhancing the punitive damage system (up to five times) and improving the court’s right to request the submission of materials through amendments to the Cooperative Law. However, existing law lacks mechanisms for the contractor to prevent the spread of damage, meaning no separate remedial measures could be taken until administrative actions or court rulings were made. Therefore, the government has introduced a right to claim an injunction (Article 28-11 of the Cooperative Law) allowing the victimized enterprise to directly request an injunction or preventive measure from the court (effective December 21, 2024).

2. Main Contents of the Right to Claim Against Technology Appropriation

Article 28-11 of the amended Cooperative Law stipulates the right to claim an injunction as follows:

3. Practical Significance and Utilization Strategy of the Right to Claim Against Technology Appropriation

The introduction of the right to claim an injunction against technology appropriation in the Cooperative Law holds significant importance in that it allows for the protection of entrusted enterprises in areas not covered by the Subcontracting Law. The Subcontracting Law has a limited application range, requiring the annual sales of the main contractor to be greater than that of the subcontractor and the main contractor to meet certain sizes (30 billion won in case of manufacturing contracts and 4.5 billion won in case of construction contracts) for applicability. Additionally, in the case of construction contracts, both the main contractor and the subcontractor must be registered construction businesses, adding industry limitations. In contrast, the Cooperative Law applies regardless of the sales volume or the industry of the entrusting enterprise.

Furthermore, under the previous Cooperative Law, when an act of technology appropriation was found to violate the Subcontracting Law, the Minister of SMEs was required to first request necessary measures from the Fair Trade Commission upon recognition, which had to review and take action within six months (maximum one-year extension in unavoidable cases). Due to these procedural constraints, there were few instances where the Cooperative Law was directly applied.

However, the introduction of the right to claim an injunction against technology appropriation in this revised Cooperative Law allows victimized enterprises to directly seek injunctions from the court without waiting for actions from the Fair Trade Commission. This is significant as it facilitates swift and effective responses to acts of technology appropriation. Victimized enterprises can directly request the cessation of infringing activities without waiting for administrative procedures, thus preventing the spread of damage at an early stage.

For this rapid remedy to be effective, it is crucial for victimized enterprises to focus on securing evidence that can serve as the basis for claiming an injunction. They should prepare and maintain documents that clearly define the timing and scope of the provision of technical materials, as well as the restrictions on their intended use, and continuously monitor the technology usage status of the entrusting enterprise to accumulate such data.

Additionally, when applying for an injunction, it is important not only to seek a ban or prevention of the act of technology appropriation but also to request supplementary measures for the substantial cessation of damage, such as the disposal of already produced products or the removal of related equipment, making it essential to specify those products and related equipment.

4. Conclusion

The right to claim an injunction against technology appropriation introduced by this amendment to the Cooperative Law has been in effect since December 11, 2024, providing protection to entrusted enterprises not covered by the Subcontracting Law and enabling direct requests for injunctions from the court without waiting for actions from the Fair Trade Commission, thus allowing for swift remedy of damages.

However, this system is still in its early implementation stage, with specific judicial criteria or practical cases not yet accumulated. Therefore, if intending to use the right to claim an injunction to effectively remedy damages, it is advisable to seek legal advice from experts regarding the conditions, scope, and methods of proving claims in a structured manner.

Attorney Shin Joon-sun has extensive experience in providing advice and resolving disputes regarding various intellectual property rights and technology appropriation cases. Please feel free to contact if you need legal advice on these matters.