[Reporter’s Notebook] SME Technology Protection Measures Lack Sophistication

On the 8th, the Ministry of SMEs and Startups announced the 'Measures to Strengthen Support for Technology Protection of Small and Medium Enterprises' at the Four Seasons Hotel in Jongno-gu, Seoul.

On the 8th, the government announced measures to protect the technology of small and medium-sized enterprises (SMEs), one of its national agenda items. As cases of technology theft during collaboration between SMEs and large corporations have increased, various policies have been established to protect them. Notable measures include strengthening inter-agency cooperation with the Korean Intellectual Property Office, the National Police Agency, and the National Intelligence Service, and raising punitive damages from the previous three times to five times.

This measure will be a considerable help in protecting SME technology. However, it is regrettable that the sophistication of preventive measures is lacking compared to the post-violation actions. This is because parts that the SME sector has emphasized as essential were not properly reflected.

Mandatory drafting of Non-Disclosure Agreements (NDAs) is a representative example. NDAs are one of the strongest protective measures SMEs have against technology infringement. Although the Win-Win Cooperation Act includes a mandatory clause for NDA signing, it only applies to principal-subcontractor transactional relationships. It is not required during the collaboration phase before the main contract is signed.

However, many cases of technology theft witnessed in the field occurred during the collaboration phase. Large corporations request vast amounts of technical data from SMEs using the main contract as bait and then quietly withdraw. Song Jeyoon, CEO of Dr. Diary, who is currently in a technology dispute with Kakao Healthcare, said, "In reality, startups find it difficult to ask large corporations to sign an NDA first," adding, "Without an NDA, most of the information provided to companies becomes potential leakage targets." There were calls for the government to create and distribute a standard NDA form and have it notarized, as large corporations often modify or delete NDAs to suit their preferences, but this was not included in the current measures.

Raising punitive damages to five times will not serve as a barrier to predatory technology infringement by large corporations. More important than the multiplier is the 'standard amount of damages.' The standard amount is calculated based on the damage suffered by the SME. SMEs must prove the amount of damage themselves in technology infringement lawsuits. However, large corporations, the opposing party in lawsuits, often do not provide related materials citing trade secrets, making objective calculation difficult. One startup CEO said, "Even if the multiplier is increased to 10 times, if large corporations use their financial power and legal teams to lower the standard amount of damages, it is all for nothing." Opinions suggest that without court authority to request documents and other support, the policy's effectiveness will be minimal.

No policy is perfect from the start. Now that the government has set the broad framework, it must listen more closely to industry opinions and fill in the details going forward. The words of Heo Insoon, CEO of Hanjin Engineering, who visited the press room last week in tears after suffering technology theft damage, echo in my ears: "Technology is completed through the repeated failures, frustrations, and pains of field engineers and researchers."