[Notable Ruling] Court Orders 3 Billion KRW in Damages for Trade Secret Infringement at Small Manufacturing Firm

A Wake-Up Call for Corporate Asset Protection
A Symbolic Ruling Reflecting the Court's Firm Resolve
Nine Years of Civil and Criminal Legal Battles for the Victim Company's CEO
"Brazenly Continuing Illegal Business Even After Guilty Verdict"

A court has ruled that a company CEO and accomplices who stole trade secrets from their former employer, resigned, and then used those secrets to establish and operate a competing business in the same industry, are liable for 3 billion KRW in damages.

In this case, which involved the misappropriation of trade secrets from a small manufacturing company rather than a large corporation, the awarded amount of 3 billion KRW is exceptionally large. The ruling is seen as a reflection of the court's firm stance on holding individuals strictly accountable for organized acts of trade secret infringement.

According to the legal community on August 20, the 14th Civil Division of the Suwon District Court (Presiding Judge Moon Hyunho) ruled on July 23 that Daeyang ENI Co., Ltd. (CEO Park) was entitled to receive 3 billion KRW plus interest jointly from five defendants, including ENB Korea Co., Ltd. (CEO Kim), in a lawsuit for damages caused by unlawful acts (trade secret infringement).

First, regarding the establishment of joint unlawful acts, the court stated, "Even if they did not conspire together, after resigning with the plaintiff's trade secrets, the defendants joined the defendant company and, with the plan to manufacture and sell RTO equipment, either removed, used, disclosed, or abetted the use of the plaintiff's trade secrets or major business assets, resulting in damages to the plaintiff. Therefore, the defendants' actions constitute joint unlawful acts with objective relatedness."

Regarding damages, the court said, "The plaintiff's loss is the property value of the trade secrets in this case," and further explained, "It is the market exchange value, taking into account the cost savings in the defendant company's technology development and the difference in product sales profits obtained by using the trade secrets compared to if the trade secrets had not been available."

The court continued, "Since the defendant company obtained thousands of trade secrets, it is likely that they gained greater benefits than if they had obtained individual secrets only. Therefore, it is reasonable to assess the property value of the trade secrets as a whole."

The court determined the damages at 3 billion KRW, taking into account: ▲the appraisal result that the defendant company's operating profit from 2015, when it was established, to 2024 was approximately 5.4 billion KRW; ▲the fact that the defendants were able to significantly reduce trial and error time and costs by using the trade secrets in this case; ▲the defendants claimed to have deleted all of the trade secrets around 2017, but since they continued to operate using the related technology, the core information likely remained mixed into the defendant company's technology; and ▲the particularly egregious illegality of the defendants' actions.

DaeYang ENI Headquarters, Hwaseong-si, Gyeonggi-do. Provided by DaeYang ENI.

Daeyang ENI is a company that manufactures and sells Regenerative Thermal Oxidizer (RTO) equipment, which treats volatile organic compound gases generated in the production of semiconductors or displays by oxidizing and burning them at high temperatures. The company supplies RTO equipment to global companies both domestically and internationally, including Samsung Display, SK Hynix, Hyundai Heavy Industries, and Panda Electronics in China.

Daeyang ENI possesses a unique technology called "Rotary Wing," which enables its equipment to operate more efficiently than competitors. To maintain confidentiality, the company deliberately refrained from filing patents and has only produced this crucial trade secret technology in-house, never outsourcing it.

Kim, who served as president and then vice president at Daeyang ENI, resigned in April 2015 and immediately established ENB Korea (formerly Donghyun Sanki Co., Ltd.), which manufactures and sells the same equipment.

The other accomplices, who had worked at Daeyang ENI as heads of technology, manufacturing, and sales management, plant manager (director), and those responsible for drafting RTO equipment drawings, also moved to ENB Korea around the time of Kim's resignation.

The problem was that, before and after their resignations, these individuals removed thousands of files containing critical trade secrets from Daeyang ENI, such as RTO equipment design drawings, cost and estimate calculation details, and automatic control system diagrams, and used them in their own business.

Seo, who was responsible for drafting RTO equipment drawings, alone removed as many as 8,688 files related to core technologies, while the other defendants removed anywhere from dozens to hundreds of files each. They even attempted to patent Daeyang ENI's Rotary Wing technology in both Korea and China.

Daeyang ENI filed criminal charges against the defendants for breach of trust and violation of the Unfair Competition Prevention Act, and also pursued damages and patent-related lawsuits.

In the criminal trial, four defendants except Kim received sentences ranging from up to two years in prison with three years of probation, to six months in prison with three years of probation. ENB Korea was fined 50 million KRW.

At the time, the court stated, "The defendants' acts of illicit acquisition and use of trade secrets are very serious and warrant strict punishment," but also noted, "It is difficult to specifically calculate the economic gain obtained by the defendants and the damages suffered by the victim company," as the reason for sentencing.

Kim, considered the main perpetrator, was indicted later than the others and was sentenced to one year and six months in prison at the first trial in October 2023. However, he was not taken into custody and is currently undergoing the second trial without detention.

Daeyang ENI site, Poseung-eup, Pyeongtaek-si, Gyeonggi-do. Provided by Daeyang ENI

In cases of trade secret infringement, it is often difficult to accurately calculate or prove the extent of damages, resulting in only small amounts of compensation being awarded that do not reflect the actual losses suffered.

Since August last year, Article 14-2, Paragraph 6 of the revised Unfair Competition Prevention Act has increased the upper limit for damages in cases of intentional trade secret infringement from "three times" to "five times" the amount of damages. In this case, however, the court recognized a remarkable 3 billion KRW in damages without applying the punitive damages provision.

Furthermore, through this ruling, the court clarified that ▲joint liability for unlawful acts can be recognized if there is objective relatedness, even without concrete evidence of conspiracy, and that in calculating damages, ▲the company that misappropriated the technology was able to significantly reduce the time and costs of trial and error by using the victim company's trade secrets, and ▲even if the leaked trade secret files were deleted, the core information remained "mixed and retained" in the technology of the company that stole the secrets, contributing to ongoing profit generation.

In this lawsuit, the plaintiff was represented by law firms YK and Seonrin, while the defendants were represented by law firm Dongin.

Kim Taekhyung, an attorney at law firm YK, said, "This ruling demonstrates the court's strict awareness of trade secret infringement and is expected to help protect companies' valuable assets and establish fair market competition order."

Park, CEO of Daeyang ENI, stated, "The defendants never admitted their guilt until the Supreme Court's conviction was finalized, nor did they take any action to restore the damage. Even after a long and difficult nine-year legal battle resulted in a final guilty verdict, none of the defendants have taken responsibility, and there has not even been a minimal apology or remorse."

He added, "Watching the defendants conduct their business even more confidently after being convicted has left me with a deep sense of despair, even raising doubts about the rule of law in this country."