Trade Secret Infringement in Competitor Job Transfers: Can Punishment Be Avoided Even If Suspected?

If you are reading this, you may be facing a police investigation on suspicion of trade secret infringement after moving to a competitor.

Moving to a competitor constitutes a violation of a non-compete obligation act, and 'trade secret infringement' is also a violation of the Unfair Competition Prevention Act. If this charge is actually established, serious legal liability follows.

You may face not only criminal punishment but also civil liability for damages.

Therefore, if you have received a criminal complaint alleging a violation of these provisions, you should promptly undergo a legal review to minimize punishment and resolve the matter. To do so, you need the help of an attorney who is well versed in the relevant issues.

You should also review in advance whether your conduct actually constitutes a legal violation, and based on this, prepare a clear and favorable initial position when giving your statement during the police investigation.

At LAWFIRM LEAP, our attorneys, who have experience at major law firms and with the police, handle these cases, so we understand the police's perspective better than anyone and can present the best strategy to favorably explain the charges during the investigation stage.

In that sense, today we would like to give practical advice to those facing possible punishment for involvement in this issue. In particular, we will explain the applicable penalties and how to minimize the severity of punishment, so please take just three minutes to review the following.

01What Constitutes Trade Secret Infringement After Moving to a Competitor?

Every company has core technology or product manufacturing know-how, which is critical confidential information for business operations and is therefore legally protected and managed.

If such confidential information is leaked externally, the company may suffer critical damage. To prevent this, the Unfair Competition Prevention and Trade Secret Protection Act provides that a person is liable if trade secret infringement is established, and it sets forth provisions to prevent such incidents.

Unfair Competition Prevention and Trade Secret Protection Act, Article 11 (Liability for Damages for Trade Secret Infringement) A person who, by intentional or negligent trade secret infringement, causes damage to a trade secret holder's business interests shall be liable to compensate for such damage.

Accordingly, a person who, through intentional or negligent infringement, causes damage to the interests of a trade secret holder must compensate for the damage, and disclosure of such information may result in imprisonment of up to 10 years or a fine of up to KRW 1.5 billion.

Given the high statutory penalties, and because in some cases you may have to pay substantial monetary damages, you should promptly consult an experienced attorney if you have received a criminal complaint on this basis. You should also check whether your conduct actually meets the legal criteria for the offense.

If you are under suspicion simply because you worked in a core department handling confidential information or held a senior position, you should also promptly clarify your position and clear your name.

02What is required for a trade secret infringement charge related to moving to a competitor to be established?

Matters involving moving to a competitor generally concern prohibitions on joining a competitor that offers similar or identical corporate value, products, or services. Such non-compete agreements take effect only if the relevant terms appear in the employment contract the person signed.

If the contract signed while employed does not contain such a provision, this fact can be used to establish that no violation occurred.

In addition, for a 'trade secret infringement' charge to be established, one must verify whether the information the other party refers to was actually leaked, and if such conduct occurred, whether the content in question actually constitutes a trade secret. If the act of removing the material is acknowledged but the information turns out not to be confidential, the charge of 'trade secret infringement' will not be established.

Also, for information to be recognized as an internal corporate secret, it must be shown that the company kept and managed it as confidential, and that considerable cost and effort went into creating the material. In addition, the material must not be information that was publicly known.

If all of these elements are established, the conduct may be found to constitute infringement; conversely, if any element is not met, that point can be argued to avoid punishment. Accordingly, one should seek the assistance of an experienced attorney who can comprehensively review these issues and render an accurate legal judgment in responding to the case.

03What if you must pay damages for trade secret infringement?

In cases where a charge of trade secret infringement related to moving to a competitor is established, you should promptly acknowledge the offense during the police or prosecution investigation and show a remorseful attitude while quickly preparing a sentencing strategy. You must also find ways to minimize the severity of the criminal punishment.

In many such cases, the complaint is filed with the aim of seeking civil damages rather than criminal punishment, so it should generally be understood that once a criminal sentence is handed down, civil damages proceedings usually follow based on that outcome. Therefore, defending against the sentence as effectively as possible lowers legal liability, which in turn can reduce the damages liability as well.

Nevertheless, if damages are claimed, you should seek ways to reduce the amount of civil damages. To do this, you need to demonstrate that the trade secret has low economic utility, that the loss suffered by the other company from the leak was not significant, and that you gained little to no benefit from it. In addition, if it is recognized that the act was not intentional, this can be cited as grounds for leniency.

Accordingly, this type of case requires the assistance of an expert who can handle both criminal and civil responses simultaneously. It is advisable from the outset to identify the key issues, establish a proper initial strategy, reduce the criminal punishment, pay a settlement amount during the criminal proceedings, and reach a settlement so that no civil damages claim is filed.

That said, some people proceed directly to civil litigation without a criminal case, and even in such situations, if the charge is established, you should defend yourself through settlement negotiations to prevent, as quickly as possible, any disruption to your professional activities. Reaching a settlement is not simply a matter of paying money and signing a settlement agreement.

From determining an appropriate settlement amount, to negotiating and agreeing on the figure, to obtaining a statement of non-punishment favorable to criminal sentencing, and drafting a settlement agreement that includes a promise not to raise further legal disputes — all of this must be concluded smoothly and promptly, which is why it is wise to work out a strategy together with an expert who has handled many such cases.

The attorneys at LAWFIRM LEAP have handled a wide range of legal disputes while working at Kim & Chang and Bae, Kim & Lee, two of Korea's largest law firms, and possess deep expertise gained from extensive experience handling the critical initial response process in every case as former police officers.

Therefore, if you work with LAWFIRM LEAP, attorneys with experience at major law firms and as police officers will personally support you from the start of the case to the end, actively substantiating the client's position and strategically handling favorable and unfavorable evidence to secure a favorable outcome.

We at LEAP understand better than anyone the situation you are in and the urgency you feel, and we promise to mobilize all of our knowledge and expertise to help secure the best possible outcome. If today's discussion has not resolved your concerns, please feel free to contact LEAP at any time. We will prepare thoroughly with a tailored strategy suited to your situation, starting with responding to the investigating authority's inquiries.

Thank you for reading this lengthy post.