1. Introduction (Summary of Results)

Law Firm Cheongchul (Lead Attorneys: Eom Sang-yun, Lee Young-kyung) won a complete victory in the lawsuit filed by the plaintiff, an automobile parts manufacturer, against the corrective order and penalty payment order issued by the Fair Trade Commission (Defendant).

In this case, the plaintiff hired a large law firm and engaged in fierce legal battles regarding ① the applicability of the 'public method plan' technical data and ② the unfairness of imposing unilateral confidentiality obligations, but Cheongchul rebutted all of the plaintiff's claims through legislative intent of the Subcontracting Act and technical analysis. This ruling is significant in that it reaffirmed the court's criteria for 'the scope of technical data' and 'the unfairness of unilateral confidentiality agreements' in subcontracting transactions.

2. Background of the Case

The plaintiff is a primary vendor manufacturing automobile body parts and supplying them to completed vehicle companies, and while entrusting part manufacturing to subcontractors, engaged in the following acts.

① Failure to Provide Written Documents When Requiring Technical Data: When asking subcontractors for public method plans necessary for part production, the plaintiff did not provide written documents containing the legal requirements (purpose of the request, consideration, and rights attributable).

② Establishment of Unfair Provisions: Established terms that unilaterally impose confidentiality obligations on subcontractors through basic contracts and confidentiality pledges.

In response, the Fair Trade Commission (Defendant) judged this as a violation of Article 12-3(2) (failure to provide written documents) and Article 3-4 (2)(4) (establishment of unfair provisions) of the Subcontracting Act, imposing a corrective order and fines. The plaintiff then filed a cancellation lawsuit against this.

3. Legal Issues (Key Arguments and Issues from Cheongchul)

The plaintiff argued the key issues in this case as follows.

① Whether the public method plan created by the subcontractor is protected technical data under the Subcontracting Act

• Lack of Independent Economic Value: The public method plan is basic information that anyone can know through internet searches, or merely copies the drawings provided by the plaintiff, thus lacking independent economic value.

• Lack of Technological Independence: The term 'subcontractor's technical data' in the text of the Subcontracting Act refers to data containing the subcontractor's unique technology, but this data includes the plaintiff's technology to obtain approval, and therefore does not qualify for protection.

• Lack of Confidentiality Management: The contents of the public method plan are widely known information in the industry, and since the subcontractor did not inform or indicate 'confidentiality' to the plaintiff, it cannot be regarded as having confidentiality management.

② Whether imposing confidentiality obligations solely on subcontractors constitutes an 'unfair provision'

• Denial of Contract Content: Sending a 'development request' is merely a notification of a simple fact or proposal, and the 'confidentiality pledge' is merely an action taken unilaterally by the subcontractor; thus, it cannot be viewed as a mutual agreement.

• Expiration of Investigation Period: The determination of unfair provisions should be based on the time of the initial basic contract signing, and since 7 years have already passed, the investigation period has expired.

• Illegality of Unfair Provision Review Guidelines: The Fair Trade Commission's notification that regards imposing confidentiality obligations solely on subcontractors as an unfair provision exceeds the scope of delegation of the original law and is null and void.

In response, Cheongchul argued that the public method plan is a technical data protected under the Subcontracting Act and that imposing unilateral confidentiality obligations on subcontractors constitutes an unfair provision, and the court largely accepted Cheongchul's arguments and dismissed the plaintiff's claim.

① The public method plan contains technical data that includes the know-how of the subcontractor.

• The public method plan includes not only simple shapes but also detailed information tailored to the subcontractor's equipment and experience such as 'type of method, order of processes, equipment used, press pressure, precautions', clearly establishing independent economic value as it helps third parties reduce trial and error and save costs.

• The Subcontracting Act does not limit technical data to 'the subcontractor's unique technology.' Even if the public method plan is based on the plaintiff's drawings, if it incorporates the subcontractor's manufacturing know-how, it can be viewed as the subcontractor's technical data.

• The subcontractors stored the relevant data on secure servers and managed it confidentially. Furthermore, the fact that the plaintiff requested the subcontractors to draft a 'confidentiality pledge' serves as evidence that the plaintiff also recognized this data as confidential.

② Imposing unilateral confidentiality obligations clearly constitutes an unfair provision.

• Each contract for each order is established based on individual development requests after the conclusion of the basic contract, and the Subcontracting Transaction Fairness Guidelines stipulate that, 'in determining the timing of concluding subcontracting contracts, the timing of individual contracts based on order forms rather than the basic contract shall be considered.'

• The confidentiality pledge also forms the content of subcontracting transactions. Subcontractors cannot refuse the plaintiff's request (confidentiality pledge) to maintain the transaction, and thus the confidentiality pledge essentially constitutes a 'contract condition' affecting the rights and obligations of the subcontractors.

• It is fair trading practice for both parties to bear confidentiality obligations equally, and it is unfair for the plaintiff to impose confidentiality obligations only on the subcontractor, even though the plaintiff also received technical data (public method plan) from the subcontractor. The flawed administrative notification declaring that the primary contractor’s unilateral imposition of confidentiality obligations on the subcontractor constitutes an unfair provision does not exceed the scope of the delegated authority under subcontracting law.

4. Significance (Meaning of this Case)

This case was the first instance where the Fair Trade Commission sanctioned the act of establishing unfair provisions related to the confidentiality obligations of technical data after the enactment of the unfair provision notification.

This ruling has great significance in that it reconfirms the recognition scope of 'technical data' under the Subcontracting Act. The court clearly stated that even if the data prepared by the subcontractor is based on the plaintiff's drawings, if it includes the subcontractor's unique operational know-how or process flows that can reduce trial and error and costs, it constitutes technical data with independent economic value. This confirms that it is not necessary to limit technical data strictly to 'highly independent new technology,' and is expected to serve as an important criterion in future similar disputes.

Additionally, it should be noted that the court emphasized 'substance' over 'form' in determining the issue of unfair provisions. The court regarded the 'confidentiality pledge' as a substantial contract condition, even if it is formally the unilateral action of the subcontractor, if it was essential for maintaining the transaction. Furthermore, in a situation where the plaintiff also receives technical data, the court clarified that imposing unilateral confidentiality obligations solely on the subcontractor is an unfair provision against the order of fair subcontracting transactions.

Thus, Cheongchul not only successfully defended the legality of the disposition by proving the difference between simple information and protectable know-how but also achieved the outcome of having the effectiveness of the Fair Trade Commission notification reaffirmed by the judiciary.

Law Firm Cheongchul consists solely of attorneys from the top five large law firms in the country, prosecutors, and legal teams from major corporations, and a team of professional attorneys in the relevant fields related to the case is formed rather than just one attorney. Cheongchul provides comprehensive solutions for the entire business rather than merely resolving specific issues, focusing on ultimately achieving what the client desires. If you need assistance in achieving your goals, please do not hesitate to contact Cheongchul.