Supreme Court: "Fair Flowchart Sections Also Constitute Trade Secrets and Key Business Assets"... Recognizes 'Non-Disclosure'
Although Lower Court Partially Acquitted... Supreme Court Overturns Lower Court with Guilty Verdict
The Supreme Court overturned the previous ruling that had imposed fines on former LG Electronics executives accused of stealing trade secrets related to a home beer brewing machine under development, then establishing a new company to sell the product. The Supreme Court ruled that the 'process flow diagram part,' which was previously judged as not constituting a trade secret, could indeed be considered a trade secret, and thus the responsibility for breach of trust should be reconsidered.
The Supreme Court Criminal Division 2 (Presiding Justice Kwon Young-jun) on the 12th of last month overturned the lower court's ruling that had fined former LG Electronics executive A 15 million won and co-defendants B and their newly established corporation C 7.5 million won on charges including breach of trust, and remanded the case to the Seoul Central District Court (2022Do16851).
The first and appellate courts recognized only the North American market research results among the LG Electronics internal documents taken as trade secrets, and ruled that the process flow diagram, which was presented as a logic map of the beer brewing machine production stages, did not qualify as a trade secret. They reasoned that the process flow diagram did not meet the non-disclosure requirement and thus was not a trade secret or a significant business asset of the victim company.
However, the Supreme Court reversed this judgment.
The court stated, "For an act where a company employee unlawfully takes materials with the intent to use them for the benefit of a competitor or themselves to constitute breach of trust, △ the materials do not necessarily have to be trade secrets, but at least must not be publicly disclosed to an unspecified number of people and cannot be ordinarily obtained without going through the holder, and △ the holder must have invested considerable time, effort, and cost in acquiring or developing the materials, and the materials must qualify as significant business assets that can provide competitive advantage through their use."
Furthermore, the court ruled, "Even if the process flow diagram in this case was created by combining publicly known information, such a combination is not generally known in the industry and includes new information about the configuration and flow structure of the victim company's home beer brewing machine as a whole. Therefore, it is difficult to ordinarily obtain this process flow diagram without going through LG Electronics, and it cannot be considered publicly known."
LG Electronics began developing the home beer brewing machine after another defendant, B, who was working at the company, submitted an idea to the internal Idea Factory contest in 2014 and was selected as a winner. In September 2015, the company formed a project team consisting of former executive A, B, and 13 others.
However, in 2016, former executive A, B, and four other defendants sequentially resigned. During this process, it was investigated that internal documents were stolen by methods such as changing file names and sending them via email from company computers. Former executive A established company C in San Jose, USA, to pursue the same business.
Park Su-yeon, Legal News Reporter
※This article is based on content supplied by Law Times.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
