Sly manufacturer found not guilty of stealing trade secrets, given the victim’s shabby security

By Dain Oh, The Readable
Nov. 14, 2023 11:15PM GMT+9

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.

The cover image of this article was designed by Sangseon Kim. This article was copyedited by Arthur Gregory Willers.

Dain Oh is a distinguished journalist based in South Korea, recognized for her exceptional contributions to the field. As the founder and editor-in-chief of The Readable, she has demonstrated her expertise in leading media outlets to success. Prior to establishing The Readable, Dain was a journalist for The Electronic Times, a prestigious IT newspaper in Korea. During her tenure, she extensively covered the cybersecurity industry, delivering groundbreaking reports. Her work included exclusive stories, such as the revelation of incident response information sharing by the National Intelligence Service. These accomplishments led to her receiving the Journalist of the Year Award in 2021 by the Korea Institute of Information Security and Cryptology, a well-deserved accolade bestowed upon her through a unanimous decision. Dain has been invited to speak at several global conferences, including the APEC Women in STEM Principles and Actions, which was funded by the U.S. State Department. Additionally, she is an active member of the Asian American Journalists Association, further exhibiting her commitment to journalism.