[SME Technology Theft Trap]⑤"K-Discovery System: Expertise Is Key... Punitive Damages Must Be Strengthened"

<5> "K-Discovery System: Expertise Is the Key... Punitive Damages Must Be Strengthened"
Government Announces Comprehensive Measures Including Expert Fact-Finding System
"Overall Positive Evaluation, but Detailed Design Is Crucial"
At Leas

Editor's NoteThe battle between small and medium-sized enterprises (SMEs) and large corporations over misappropriated technology leaves only scars, whether won or lost. Not only is it extremely difficult to achieve a favorable verdict, but even when SMEs do win, the awarded damages are often so minimal that many are forced to shut down. This has led to an unwritten rule: "If your technology is stolen, it's better to do nothing and consider it bad luck." These battles, which are difficult to win and offer little reward even in victory, occur around 300 times a year. Over the course of five articles, The Asia Business Daily will examine the current state and causes of technology misappropriation that devastate SMEs, and seek out possible solutions.

The key to eradicating technology misappropriation against SMEs lies in "easing the burden of proof" for victimized companies. If it becomes easier for victims to prove technology infringement, they are more likely to receive higher compensation and more companies will be encouraged to raise issues proactively. Last month, the Ministry of SMEs and Startups and other relevant agencies announced a comprehensive set of measures to eradicate technology misappropriation, including the introduction of a "Korean-style discovery system" to support victims in proving infringement. Experts generally assessed the government's measures positively, but also called for improvements in the details of implementation.

Attorney Heekyung Park from the Foundation is being interviewed by The Asia Business Daily. Photo by Seohee Lee

‘Expertise’ Is Key... Calls for Legislation Tailored to SMEs

According to the government on the 24th, the Korean-style discovery system is a localized adaptation of the American discovery system, which requires both parties to disclose and submit evidence before a trial. To prevent excessive litigation for the purpose of "fishing for information," the government decided to use an "expert fact-finding system," in which court-appointed experts conduct investigations instead of the parties themselves, unlike the U.S. system.

Park Heekyung, attorney at the Kyungcheong Foundation, stated, "If we follow the American model, the time and cost required for the discovery process alone could exceed the cost of hiring an attorney, making it difficult for victimized companies to utilize the system. Adopting elements from the German and Japanese systems was a good decision."

However, there are predictions that the success of the system will depend on enhancing the expertise and diversity of the court-appointed expert groups and precisely defining the scope and subjects of investigation. Attorney Park added, "As technology misappropriation disputes become more complex, I believe that at least three experts from various fields, such as law and security, should be involved in each case. Since most evidence of technology misappropriation is digital and perpetrators often delete data, forensic experts are also needed."

Patent attorney Park Minhung of WiseUp Patent & Law Office commented, "The key is to operate the system effectively while minimizing side effects such as trade secret infringement or abuse of investigations. The scope of cases should be limited to those where technical facts are at issue, and only relevant materials should be collected to prevent abuse of the system."

There were also calls for "targeted amendments" exclusively for SMEs to dramatically reduce their burden of proof. Currently, multiple laws provide protection in technology misappropriation disputes, including the Trade Secret Protection Act, the Subcontracting Act, the SME Technology Protection Act, and the Win-Win Cooperation Act. Some argue that the SME Technology Protection Act and the Win-Win Cooperation Act, both under the jurisdiction of the Ministry of SMEs and Startups, should be amended to lower the evidentiary threshold for SMEs, which are the "relative underdogs."

Bae Sooyoung, attorney at PartOne Law Firm, stated, "The requirements for recognizing technology infringement under the SME Technology Protection Act and the Win-Win Cooperation Act are not significantly different from those in the Trade Secret Protection Act or the Subcontracting Act. The 'confidentiality management' requirement-how strictly information is kept secret-should be relaxed to create a more favorable environment for SMEs and venture companies, which often have weaker protection systems."

Strengthen Punitive Damages... Setting a Minimum Threshold Is Also an Option

There was a consensus that damages should be "punitive and high" to have both preventive and remedial effects. To achieve this, it was pointed out that the current punitive damages system should be made more practical and widely used.

Under current law, punitive damages for technology misappropriation are specified in the Subcontracting Act, the Trade Secret Protection Act, and the Win-Win Cooperation Act, allowing for compensation up to three times the amount of damages. Courts consider factors such as ▲whether the infringer held a superior position, ▲the degree of intent or awareness of potential harm, and ▲the duration and frequency of the infringement when applying triple damages.

Patent attorney Park noted, "When the damages are not high, even triple compensation does not feel punitive. The level of punitive damages should be increased and the scope of application expanded." He added, "Setting a minimum threshold for damages related to technology misappropriation is also an option." Attorney Park emphasized, "In the United States, damages in such cases can reach tens of millions of dollars, while in Korea they rarely exceed 500 million won. The punitive damages system should be as robust as in the U.S., to the point where companies realize that 'if you steal technology, you will be ruined.'"

Technology Should Be Recognized as an Irreplaceable Asset

There were also strong calls to correct the "uneven playing field" that begins at the contract stage. Unlike large corporations with dedicated legal teams, SMEs, which often lack legal staff and knowledge, are at a disadvantage from the contract drafting stage. The current Win-Win Cooperation Act requires that a confidentiality agreement be signed when a subcontractor provides technical data to a client company, but there are still many cases where this is ignored or cleverly circumvented.

Attorney Bae stated, "There have been calls among SME workers for the ability to have contract terms reviewed by experts before signing important agreements. In particular, if the Korea Commission for Corporate Partnership were to offer support services linked to the technology escrow system, SMEs that previously tolerated unfairness out of fear of jeopardizing contracts with large corporations might be able to use such services without hesitation."

Ultimately, it was pointed out that society as a whole needs to recognize the value of painstakingly developed technology. Attorney Park stated, "All sectors of society-including large corporations, SMEs, courts, and investigative agencies-need to share an understanding of how technology is an intangible asset of immense economic value. When the perception that technology is a source of competitiveness and an irreplaceable asset is firmly established, the number of companies suffering unfair losses will decrease."