Ministry of SMEs and Startups Announces Agreement Reached on 12 Technology Infringement Disputes Between Hyundai Heavy and Samyoung Machinery

First Dispute Resolved Under SME Technology Infringement Administrative Investigation System
June 2019 "Unauthorized Provision of Piston Manufacturing Technology" Report
Ministry of SMEs and Startups Mediates Deadlock Between Both Companies... Agreement Leads to Cooperation Efforts

Kang Young, Vice President of Hyundai Heavy Industries (left), Kwon Chil-seung, Minister of SMEs and Startups (center), and Han Guk-hyun, CEO of Samyoung Machinery, are posing for a commemorative photo at the briefing room of the Government Seoul Office on the 27th.

[Asia Economy Reporter Kim Bo-kyung] An agreement has been reached on 12 disputes between Hyundai Heavy Industries and Samyoung Machinery through the government's administrative investigation into technology infringement of small and medium-sized enterprises (SMEs). This is the first case of dispute resolution since the introduction of the technology infringement administrative investigation system.

On the 27th, Kwon Chil-seung, Minister of SMEs and Startups, held a briefing at the Government Seoul Office and stated, "Through the technology infringement administrative investigation, we have reached an agreement to resolve 12 disputes between Hyundai Heavy Industries and Samyoung Machinery and concluded the investigation."

This is the first case of dispute resolution since the introduction of the technology infringement administrative investigation system following the 2018 amendment of the Small and Medium Enterprise Technology Protection Act.

◆Prolonged Litigation... Ministry of SMEs and Startups Mediates Negotiations, Reaches Agreement= This case involves Samyoung Machinery reporting to the Ministry of SMEs and Startups in June 2019 that "Hyundai Heavy Industries, during the process of diversifying its suppliers, unauthorizedly provided its piston manufacturing technology and jointly developed piston design drawings to another SME."

Before the agreement, the piston-related technology dispute between Hyundai Heavy Industries and Samyoung Machinery involved four criminal cases, three civil cases, three administrative lawsuits, and two administrative agency reports. Since the report to the Ministry of SMEs and Startups, the matter has been submitted four times as an agenda item to the Win-Win Mediation Committee.

Considering the prolonged litigation over ownership of technical data and the worsening damage to both parties, the Ministry of SMEs and Startups recommended mediation under relevant laws to both companies in April before concluding the administrative investigation.

The Ministry facilitated negotiations between the parties after recommending mediation and, together with external experts (Technology Infringement Advisory Group), analyzed the court's standards for calculating damages. Based on this, they presented specific compensation guidelines and explored the possibility of an agreement between Hyundai Heavy Industries and Samyoung Machinery.

The two companies held eight working-level meetings mediated by the Ministry of SMEs and Startups. During this process, Samyoung Machinery demanded damages, while Hyundai Heavy Industries maintained that only partial consolation payments were possible, making the prospect of an agreement uncertain.

To break the deadlock, the Ministry proposed that ▲ Samyoung Machinery accept a lump-sum payment as consolation money, ▲ Hyundai Heavy Industries actively cooperate by supplying Samyoung Machinery with transaction volumes at pre-dispute levels, and ▲ the Ministry support Samyoung Machinery's development of new products for supply through technology development support projects. Hyundai Heavy Industries and Samyoung Machinery accepted these proposals, leading to the final agreement.

The Ministry of SMEs and Startups plans to submit this agreement as an agenda item to the Win-Win Mediation Committee to promote mutual growth and seek cooperation from related agencies. It will also revise relevant guidelines to enable Samyoung Machinery to utilize the Ministry's technology development support system. When reviewing technology development support projects, additional points will be awarded if transactions resume following the Ministry's mediation.

At the briefing, Han Guk-hyun, CEO of Samyoung Machinery, said, "It was very difficult to engage in legal battles against a large corporation, but I am pleased to have achieved a good outcome," and added, "I hope to restore a good relationship soon and create a new model of mutual growth between large and small-medium enterprises."

Kang Young, Vice President of Hyundai Heavy Industries, expressed gratitude to the Ministry of SMEs and Startups for their active efforts to resolve the technology dispute and said, "Since the technology dispute was resolved through agreement rather than legal litigation, we will not dwell on the past and will strive for future mutual growth."

◆Ministry of SMEs and Startups to Support Dispute Resolution and Mutual Growth Between Companies= The technology infringement administrative investigation system was implemented as part of the measures to eradicate technology theft from SMEs announced in February 2018.

The Ministry of SMEs and Startups is striving to achieve agreements through mediation recommendations rather than corrective recommendations as follow-up measures to technology infringement administrative investigations. This is because if large corporations do not comply with corrective recommendations, the affected SMEs must undergo lengthy civil and criminal litigation.

To enhance the effectiveness of mediation, in May 2019, the Ministry launched the Win-Win Mediation Committee in collaboration with the Prosecutor's Office, the Fair Trade Commission, the National Police Agency, and the Korean Intellectual Property Office, establishing a cross-government cooperative system.

In August, to prevent the expansion of damages to SMEs caused by prolonged litigation, the Ministry completed amendments to the Win-Win Cooperation Act to eliminate factors unfavorable to SMEs suffering from technology infringement in civil lawsuits.

When parties reach an agreement following the results of a technology infringement administrative investigation, the case will be submitted as an agenda item to the Win-Win Mediation Committee to support the amicable resolution of all disputes between the parties. If the parties resume transactions, related systems will be developed to support prototype production costs through purchase-conditional (or joint investment-type) technology development projects.

Minister Kwon said, "This case is significant in that it demonstrates the consistent process pursued by the Ministry of SMEs and Startups to resolve technology disputes between large and small-medium enterprises through mutual growth rather than punishment."

He added, "Going forward, the Ministry will continue to promote agreements between parties through technology infringement administrative investigations and develop a mutual growth process that nurtures these agreements through the Win-Win Mediation Committee and technology development support projects."