A manufacturing company that used a rival company’s core intellectual property in its own production was found not guilty of stealing trade secrets by a South Korean court. Information that is not protected with minimum security measures cannot be considered trade secrets, the court ruled.
According to a local news report by The Herald Business on Tuesday, Suwon District Court ruled in favor of the corporate defendant accused of violating the nation’s unfair competition law. The case involved competing manufacturers whose rivalry had recently been exacerbated due to a technical manager from the plaintiff’s company switching sides to join the defendant while taking along with him the plaintiff’s contended “business secrets.”
In June 2016, the manager, who oversaw a technical department and was about to transfer to the other company, copied four files onto a USB flash drive regarding data on a specific dye mixing ratio essential to the painting of electric cars. With the files provided by the crossover employee, the rival company was able to apply colors to their own products, colors which had been requested by their customers.
South Korea’s unfair competition law holds benefitting firms accountable when the leaking of trade secrets occurs. In addition, the person who stole the confidential information is also held liable.
Prosecutors claimed that the corporate defendant broke the unfair competition law which bans the acquisition or utilization of trade secrets. Law enforcement also argued that the former employee had signed a confidentiality agreement while employed by the plaintiff.
However, the court ruled against the prosecutors, considering the poor security measures taken by the victim company. “According to precedents set in the Supreme Court, trade secrets in unfair competition law must be maintained as secrets through reasonable efforts, so that a person who gains access to the information can acknowledge them as secrets,” the court ruled.
“The corporate plaintiff did not set passwords for their important files, did not label the files as being confidential, and did not designate employees to maintain confidentiality regarding them. It is difficult to see that the corporate plaintiff had maintained the files as trade secrets. Moreover, the confidentiality agreement did not indicate which data are confidential, not to mention that the firm did not have any internal regulations for the handling of trade secrets,” the court further stressed.
