After Much Deliberation, Filing a Lawsuit Becomes Another "Hell" [SME Technology Theft Trap] ②

<2>A Lawsuit After Much Deliberation Becomes Another 'Nightmare'
Despite Technology Theft, Legal Action Discouraged by Peers
44% of Victimized Companies "Took No Action"
Filing a Lawsuit Leads to a "Problem Company" Stigma
Severed Busine

Editor's Note
When a small or medium-sized enterprise (SME) fights a large corporation over stolen technology, the outcome-win or lose-often leaves only scars. Not only is it difficult to pass through the narrow gate of victory, but even if they do win, the damages awarded are so negligible that many SMEs are forced to close their businesses. This has led to an unwritten rule: "If your technology is stolen, consider it just bad luck and do nothing." No matter how hard they fight, it is hard to win, and even a victory is almost indistinguishable from a loss. About 300 such cases occur annually. The Asia Business Daily will examine, over a series of five articles, the current state and causes of technology theft that drives SMEs to ruin, and will seek possible solutions.

SME A, a manufacturer of indoor ventilation systems, was commissioned five years ago by mid-sized company B to install equipment worth 400 million won. SME A held a patent for technology that reduced power consumption by about 30% and minimized noise compared to existing ventilation systems. Company B requested that SME A provide technical documents, including detailed blueprints, claiming they were needed for internal investment review. SME A handed over all technical materials, including simulation analysis data, but soon after, received a response from Company B stating that the contract would be put on hold due to "budget issues."

Mr. Yoon, then CEO of SME A, said, "I couldn't refuse to submit the materials if I wanted the contract to go through." A year later, Mr. Yoon discovered that a subsidiary of Company B had launched and was supplying a product similar to his company's system. Although he felt a deep sense of shock and betrayal, after much deliberation, Mr. Yoon decided not to pursue legal action. He recalled, "We don't even have a legal team, so I couldn't set aside work to focus solely on a lawsuit," adding, "People around me also discouraged me, saying not only is it extremely difficult to win, but if we lose, the company could go bankrupt."

Half of Victimized Companies "Took No Action"

For SMEs, technology is a vital asset, yet within the industry, the prevailing sentiment is that "it's best to just endure it" when it comes to legal action against technology theft. Whether they win or lose, SMEs often have much more to lose than to gain. From the moment a lawsuit begins, SMEs are plagued by anxiety that their business relationships may be severed. In a structure where about half of sales are concentrated among a few large corporations, losing a business relationship can be fatal to a company’s survival.

The situation is even more dire for venture companies and startups. If negative rumors spread in the industry and they are labeled as a "problematic company," their lifeline-investment funds-can dry up. Park Heekyung, an attorney at the Kyungcheong Foundation, said, "Victimized companies are merely seeking to assert their rights, but if the case becomes an issue and rumors spread in the industry, other companies will be reluctant to enter into contracts with them," adding, "For SMEs that need to win contracts and attract investment, doing nothing may seem like the better business decision."

As a result, about half of victimized SMEs are left powerless even after their technology is stolen. According to the "Policy Demand Survey for Eradicating Technology Theft in SMEs" conducted by the Korea Federation of SMEs in 2023, 10.7% of SMEs holding patents reported having experienced technology theft, and among these, 43.8% said they "took no separate action."

Difficulty of Proving Damage Leads to Prolonged Legal Battles... Many Give Up Midway

Even if they muster the courage to file a lawsuit, the road ahead is fraught with difficulties. It is extremely hard for victimized SMEs to prove that technology theft occurred. Most of the evidence for such acts exists within the business premises and work-related data of the perpetrating company, making it nearly impossible for the victim to access. Even if the court orders the submission of documents, if the other company insists that "no such documents exist" or refuses to submit them on the grounds of "trade secrets," there is virtually no way to compel disclosure.

Attorney Park said, "Having represented victimized companies, I have tried every document submission order available under current law, but I have never been able to obtain infringing products-it is that difficult to gain access. Even if the necessity of evidence is thoroughly explained and the court barely grants permission, if the other company immediately appeals, there is a separate dispute over document submission at the high court, apart from the main case. This is how lawsuits end up taking more than a year."

When the arduous process of proving damage leads to a protracted legal battle, SMEs are put at an even greater disadvantage. The longer the case drags on, the more litigation costs snowball, and as cash flow dries up, business operations are disrupted. According to the "2024 Technology Protection Status Report" published by the Ministry of SMEs and Startups, it takes an average of over one year to reach a first-instance verdict in technology theft cases, and the win rate for SMEs is only 32.9%. As a result, many companies withdraw their lawsuits before entering the main trial or give up midway through the first instance.

An SME official said, "If a large corporation employs a kind of 'delaying tactic' to drag out the lawsuit, SMEs have no way to endure. If we lose, we will bear all the litigation costs and go bankrupt, and even if we win, the relationship with our clients will be destroyed, leading to canceled contracts. From our perspective, the saying 'just enduring is the answer' rings true."