A Comparative Study on the Laws Related to Technology Protection in Japanand Korea - Focusing on Recent Revision and Trend of the Korean Patent Act,
Unfair Competition Prevention Act and, etc. *Invited Researcher: CHO, Yongsun**

Recently, the risk of technology leakage has increased due to the developments of globalization,
IT and networking, and open innovation.
Japan has been taking the following measures: reducing the risk of technology leakage inassociation with double transfers, etc. by adding the principle of employer ownership to theemployee invention system through amendment of the Patent Act; organizing infringement types fortechnology leakage by amendment of the Unfair Competition Prevention Act; and reinforcing
sentencing against technology leakage outside Japan; and other measures.
South Korea has the Invention Promotion Act, Industrial Technology Protection Act, Defense
Industry Technology Protection Act, Small Business Technology Protection Act, and other laws
related to technology leakage, in addition to the Patent Act and the Trade Secret Protection Act.
These laws supplement each other; however, there are other issues, such as duplication of the scopeof application.
Unlike Japan, Korea has complicated employee invention succession procedures. Korea also
has risks related to the leakage of core personnel and technology since there are gaps in granting
non-exclusive licenses between large companies and small and medium companies depending on theexistence of succession provisions, insufficient employee incentives, etc.
Korea introduced a enhanced damage system where triple the amount of damages may bereceived from the Patent Act, Unfair Competition Prevention Act, and Industrial Technology
Protection Act, as a countermeasure against technology seizure and leakage.
In this article, the legal system of technology protection, the employee invention system, andthe enhanced damage system will be compared and analyzed, mainly between Japan and Korea,
from the perspective of technology protection.

* This is a summary of the report published under the 2019 Collaborative Research Project on Harmonization of Industrial Property

Right Systems under a commission from the Japan Patent Office.

** Assistant Professor, Head of Department of Industrial Security, Hansei University.

iI. Introduction
II. Technology Protection Law System
1.

Current Status of Technology Leakage in Japan and Korea

2.

Current Status of Technology Protection Laws in Japan and Korea
Unlike Japan, South Korea has taken measures against technology leakage through legislation of

the Invention Promotion Act, Industrial Technology Protection Act, Defense Industry Technology
Protection Act, Small Business Technology Protection Act, and other laws, in addition to the Patent
Act and the Trade Secret Protection Act.
3.

Issues(1) Necessity of Development of a Legal System in Association with Duplication between Laws
The types of actions under the Unfair Competition Prevention Act, Industrial Technology
Protection Act, and Defense Industry Technology Protection Act are almost the same; however, only
the punishment level differs between them. Therefore, it is necessary to compile action types and toorganize them, such as by distinguishing sentencing alone, etc.

Technology Information
Patent (Patent Act)→ Korean Intellectual
Property Office
Small Business Technology(Support and Protection Act)
→ Small and Medium Enterprise Agency
Industrial Technology (Protection Act)→ Ministry of Trade, Industry andEnergyDefense Industrial Technology(Protection Act)→ Ministry of National Defense

Technology Serviceii

Business information
Trade Secret (Unfair
Competition PreventionAct) → KoreanIntellectual Property Office(2) Revitalization of Use of Prior User's Right under the Patent Act
In Korea, there are provisions for prior user’s rights alone. Even in cases where theseprovisions are used and at explanatory meetings concerning measures for a company’s trade secrets
that are taken by public institutions, there are not many cases introducing the prior user’s right andthere are not many relevant court precedents. Therefore, recognition of the prior user’s right system
is insufficient. Consequently, Japanese theories and court precedents provide many suggestions, suchas a proposal of relevant issues and a method to interpret them: (i) whether an invention under thesame system is included in the prior user’s right; (ii) whether business scope can be expanded; (iii)
whether the implementation form can be changed, etc. Korea operates the Trade Secret Certification
System and Technical Data Deposit System and it is considered that these systems should be linked
with the prior user’s right system.
(3) Judgment of Degree of “Secrecy Management” under the Amended Unfair Competition
Prevention Act of 2019
It is necessary for Korea to refer to the interpretation methods of secrecy management under
the Unfair Competition Prevention Act in the US and Japan by revising provisions related to thedefinition of secrecy management under the Korean Unfair Competition Prevention Act.
The United States takes the stance of making an optimal judgment in each case by comparing
and weighing the benefits and costs of the requirement for secrecy management, and there are notmany cases strictly requiring management of trade secrets.
According to the Japanese Trade Secrets Management Guidelines, the Case of Leakage ofCustomer Information of Benesse Holdings, etc., the possibility of objective recognition is an
important element, and trade secret management measures are also important for judging thenecessity of secrecy management; however, Japan’s standpoint is that it is not appropriate to consider
the possibility of objective recognition as an independent requirement.
Korea explains the criteria of appropriate effort and reasonable effort in the first judgment
related to reasonable effort (judgment of the Uijeongbu District Court rendered on September 27,
2016 (2016 (No) 1670)); however, it still shows the limit where access restrictions and the possibilityof objective recognition are considered to be concurrent elements. It is therefore necessary tounderstand the trade secret management measures as a means to ensure the possibility of recognition
with a focus on the possibility of objective recognition, like Japanese Trade Secret Protection
Guidelines and relevant court precedents. Based on these judgments, the secrecy in management canbe interpreted flexibly to suit to companies’ circumstances.

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(4) Development of Provisions Related to Criminal Punishments
Unlike Japan, Korea has sentencing standards for trade secret and industrial technology
infringements; however, since actual sentences diverge from the sentencing standards, they need to
be organized.
Category

Statutory penalty

Reduction

Base

Aggravation

Leakage within the

No more than 10

Up to 10 months

From 8 months to 2

From one year to 4

country

years

years

years

Leakage outside theNo more than 15

From 10 months to

From one year to 3

From 2 years to 6

country

years

one year and 6

years and 6 months

years

monthsIn addition, in consideration of the fact of the organizational technology leakage of companies
and the fact that companies have production capabilities incomparable with individuals, it is essential
to strengthen punishments for companies. In terms of the US Foreign and Economic Espionage
Penalty Enhancement Act of 2012 and the Japanese Unfair Competition Prevention Act, provisions
were introduced to impose increased punishments on corporations. However, the Korean Trade
Secret Protection Act, etc. has no provisions to impose increased punishments on corporations as inJapan. It therefore is necessary to introduce these provisions.

III. Employee Invention System
1.

Introduction
According to the statistics related to technology leakage, technology leakage by employees

accounts for 80% or more. Technology leakage by employees has a relationship to some extent to
the fact that the employee invention system has not been developed. In Korea, there is time lag
between the effectuation by notification of succession of an employee invention and the completionof the invention, and there is a risk of a double transfer during the period of this time lag. In addition,
there are issues of a gap in granting non-exclusive licenses depending on the existence of succession
provisions between large companies and small and medium companies, etc. and therefore theemployee invention system needs to be corrected.
2.

Japan

iv

Japan introduced the principle of employer ownership by the amendment of the Patent Act in
2015; it adopted the principle of private autonomy that values agreements between parties; and it isevaluated that the amended Japanese Patent Act reduced legal uncertainty. However, Japan still
adopts the principle of inventor ownership if there are no provisions for employee invention in
universities, small and medium companies, etc. There are issues related to double transfers related to
employee inventions and ownership issues in joint research. If the right is acquired without paying
compensation, there is the risk of potential lawsuits related to reasonable benefits.
According to a survey in 2017 by the Institute of Intellectual Property (IIP) (replies obtained
from 843 out of 2,000 companies and from 1,958 out of 7,000 employees), 88.8% of employers areaware of amended matters related to the recognition of the new employee invention system and75.4% of employers are aware of the Guidelines. Therefore, the employee invention system isconsidered to have been disseminated to employers to an extent. However, only 18.5% of employees
replied that they knew of the new employee invention system and it seems to be necessary todisseminate the recognition of the employee invention system to employees.
In addition, concerning ownership of the right to the grant of a patent, in cases of companies,
cases where the right fundamentally belongs to employers accounted for 46.2% and cases where theright fundamentally belongs to employees accounted for 49.9%; however, in cases of universities,
cases where the right belongs to employees accounted for 83.2%, which was very high and themeaning of the grounds for continuation of the system where the right fundamentally belongs to
employees was confirmed.
3.

South Korea(1) Amendment History of the Patent Act and Invention Promotion Act(2) Issues(i) Gap between large companies and small and medium companies
According to Article 10 of the Korean Invention Promotion Act, if there is no agreement related
to reserved succession of the right to a patent although companies have made various types ofcontributions, such as providing salaries, research costs, devices, etc., even a non-exclusive license
is not granted to large companies and medium companies. This measure is unlawful and relevant
provisions must be amended.

v

(ii) Inclusion of Risk of Double Transfer
Before the amendment in 2006, if the invention is completed, it is possible to interpret that theright to a patent immediately belongs to the company pursuant to the provisions of succession(ownership subject to condition precedent). However, due to the amendment in 2006, the time ofsuccession of an employee invention in Korea became the time when the employer notifies theemployee of the intention of succession. There is then a time lag between the time when an employee
invention is completed and the time of succession. Therefore, if the employee transfers the right to
the grant of a patent to a third party after the employee completes the employee invention, it may
cause a double transfer as well as civil and criminal issues, and the method of resolution becomes
more complicated.
From the civil perspective, if a third party “proactively joins” in the double transfer, theemployer may pursue the tort liability of the employee and the third party; however, the employer
must prove the malpractice and complicity of the third party.
From the criminal perspective, if there are provisions for succession, it results in a professional
breach of trust; however, in cases where there are no provisions for succession and an employee files
a patent application for his/her employee invention under the name of the employee, not the employer,
it corresponds to the employee executing his/her own right and it does not result in a professional
breach of trust and application of the crime of trade secret leakage will be denied.
(iii) Issue of ownership of joint inventions
In cases where an employer (a company that participated in joint research) intends to succeed
the right to receive a patent from an employee of the company, the consent of the employees of theother companies is required. If consent cannot be obtained, the employer cannot succeed the rightand the employer only has a non-exclusive license.
(iv) Technology leakage by an employee leaving the company without telling of the completion ofan employee invention
In cases of an employee invention, if the employee does not notify the fact of an invention, theemployer cannot know that fact. If the employee resigns from the company without notifying the factthat he/she completed the invention and another company files a patent, there is a risk of technology
leakage.

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(3) Direction of Amendment(i) Advantages of the principle of employer ownership from the perspective of the amended
Japanese Patent Act
In cases of adopting the principle of employer ownership, it is possible to resolve the uncertain
relationship of rights by arranging that the right to the grant of the patent, etc. is automatically
succeeded to the company when the employee invention is completed in order to conform to the timeof completion of the employee invention to the time of succession, and thereby the possibility of tort,
such as double transfer using the unclear relationship of rights, can be prevented.
In cases of adopting the principle of employer ownership, when there are provisions ofsuccession in advance, the employee has no right to the employee invention in question. Therefore,
if the right is transferred to a third party, the transfer is invalid and it is possible to claim a transfer ofthe patent based on the misappropriated application.
In cases of adopting the principle of employer ownership, the right to the invention is
succeeded by the employer at the same time as the invention. Therefore, in cases of a double transfer,
this results in a leakage of the trade secrets of the employer. In addition, in cases of joint research,
the share of the employee belongs to his/her employer and is shared by both employers. Therefore,
complicated situations can be avoided, such as where the consent of the employees of anothercompany must be obtained, etc.
(ii) Methods of the German Act on Employee Inventions (ArbnErfG) and the Amended Japanese
Patent Act
According to the Amended German Act on Employee Inventions in 2009 (ArbnErfG), it isstipulated that if an employee disposes of the invention in question before the employer executes theright to claim transfer by the notification, the disposition is ineffective for the employer to the extent
of infringement of the employer’s right (Section 7 (2) of the ArbnErfG). The provisions of
notification between employer and employee under the Korean Invention Promotion Act are similar
to those of the German act before amendment in 2009. There is a bill to stipulate that disposition by
the employee is ineffective until the employer notifies of succession, like in Germany. However,there are many problems with the fact that the period of notification of the intention is 4 months
under the Korean Invention Promotion Act. Therefore, it is preferable to delete the period of
notification of the intention.
Under the Amended Japanese Patent Act, additional succession procedures are not necessaryvii

except provisions of succession and it is possible that issues of ownership of rights arising fromdouble transfer, joint invention, etc., are naturally resolved.
4.

Current Status of Employee Invention and Incentives

IV. Enhanced damage system
1.

Outline2.

Current Status of Countries that Introduced the Enhanced Damage System
The Patent Act in 1952 stipulates in Article 284 that the court has the discretion to increase the
U.S.A.

compensation for damages within the range of three times of the appropriate amount of lost profit
or reasonable licensing fees.
The amended Trademark Law in April 2019 stipulated that if the degree of infringement of the

China

trademark right is significant, compensation for damages can be increased up to five times theamount.
Under the Patent Act in 2013, if the patent infringement is intentional, the court may calculate

Taiwancompensation for damages more than the original amount in consideration of the infringement
conditions at the request of the victim. However, the amount shall not exceed three times theamount of the damages.

Australia

3.

In Article 122 (1A) of the Amended Patent Act in 2006, it is stipulated that additional damages
may be added for intentional infringement.

Japan
Concerning Article 114 of the Copyright Act, it used to be considered to be one of the proposals

to compensate three times the amount that could be received based on the estimated amount ofdamages in malicious cases with intention or gross negligence. The Report on the Review of the
Judicial Relief System in January 2004 concluded that since the introduction of the punitive damage
system is a big issue related not only to copyright infringement lawsuits, but also to the entire civil
action system, the introduction was put off in consideration of the current status where theintroduction is not discussed in other relevant laws and regulations, such as patent rights, trademark
rights, etc.

viii

- Today, where the Civil Code and the Penal Code are divided, the principle of fair appointmentof loss, which is on the assumption that the objective of compensation for damages is to cover thedamages, has been established.
- Compensation for damages under Japanese law is compensation for lost profit, but is not for a
restriction of actions. Therefore, punitive damage conflicts with the basic Japanese principle ofCons

compensation for damages based on tort (Case of Mansei Kogyo Kabushiki-Kaisha).
- Introduction of punitive damages is compensation in excess of lost profit. Therefore, it does notconform to the industrial structure balance and hinders industrial development.
- It is more necessary to build a conflict-settlement system that can appropriately evaluate thevalue of intellectual property rights, such as patent rights, etc., and that the industry can accept,
rather than the introduction of a punitive damage system.
- In intellectual property right infringement cases, it is difficult to demonstrate the correct amountof damages that the right holder suffered and there are many cases where the right holder cannot
be satisfied with the actual amount of damages. Approximately three times the amount of damages

Pros

that is actually demonstrated is “fair.”- Korea and China introduced punitive damages, and compensation for damages in Japan is lower
than in the United States, China, and Korea from the perspective of a foreign country. Therefore,
advantages for foreign companies decrease.

4.

Current Status of the Enhanced Damage System in Korea(1) Current Status of Introduction
Fiscal
year

2011

2014

2015

Title of law(corresponding
provisions)

Subcontracting Act(Article 35)

Act on the Protectionof Fixed-term andPart-time Workers(Article 13)
Use and Protection ofCredit Information Act(Article 43)

Responsibilities

Intention, etc.

Action type

Original contractor

Intention /negligence

Unlawful decision of price
Cancellation of outsourcing,
unlawful return of goods
Unlawful reduction of amount,retaliatory measures
Use of technical materials without
permission

Employer

Intention

Discriminatory treatment

Credit informationcompany

Intention /grossnegligence

Leakage, loss, theft, alteration,and damage of credit information

ix

2015

Personal Information
Protection Act(Article 39)

2016

Network Act(Article 32)

2016

Fair Agency
Transactions Act(Article 34)

2017

Fair Transactions inFranchise BusinessAct (Article 37-2)

Franchiseheadquarters

Intention /negligence

2018

Product Liability Act(Article 3)

Manufacturers

Intention

2018

Fair Trade Act(Article 56)

Business operators
Association ofbusiness operators

Intention /negligence

Business operators

Intention /grossnegligence

Provision of false and exaggerated
information
Unlawful discontinuation ofprovisions of goods and services
Retaliatory measures
Negligence despite knowing
defects of products
Prohibition of unlawful concerted
actions
Prohibition of retaliatory
measures
Restriction on unlawfulcompetition
Occurrence of environmental
diseases due to adverse
environmental factors

Alliance system
operators

Intention /negligenceIn cases of causing damages tocontract farms

Large franchiseand retail business

Intention /negligence

Prohibition of reduction of priceof goods, prohibition of returning
goods
Use of employees of suppliers
Retaliatory measures

Outsourcing
companies

Intention /negligence

Delivery charge of entrusted
companies
Detrimental treatment when filingan application for settlement

Infringers

Intention

Infringement of patent rights andexclusive licenses

Infringers

Intention

Infringement of trade secret

Infringers

Intention

Industrial technology
infringement

2018

2019

2019

2019

2019
2019
2019

Environment
Protection Act(Article 19)
Act on Livestock
Farm Alliance
Systems(Article 34-2)
Act on Fair
Transactions in Large
Franchise and Retail
Business(Article 35-2)
Act on the Promotionof Collaborative
Cooperation between
Large Enterprises andSmall-Medium
Enterprises(Article 40-2)
Patent Act (Article
128)
Unfair Competition
Prevention Act(Article 14-2)
Industrial Technology
Protection Act(Article 22-2)

Persons handlingpersonal
information
Information
communication
service providers

Intention /grossnegligence
Intention /grossnegligence

Suppliers

Intention /negligence

Loss, theft, leakage, falsification,
alteration, and damage of personal
information
Same as above
Coerced purchase, coerced payoff(2) Background for Introduction of Enhanced Damage under the Patent Act, etc.
Korea introduced the enhanced damage system to the Patent Act, Unfair Competition
Prevention Act, and Industrial Technology Protection Act in 2019. The median value of thexcompensation for damages in patent infringement lawsuits is only one-ninth of that in the US. The
percentage of cases where the amount of damages was calculated by the judge’s discretion due todefective evidence reached 60%. In cases of infringement of trade secrets, since it was difficult todemonstrate whether the other party used the trade secrets or not due to characteristics of trade secrets,
the lawsuits tended to be abandoned or lost. It caused problems in Korea, such as increased
recognition that it is profitable to infringe intellectual property rights, and then the enhanced damage
system was introduced.
(3) Major Details of the Amended Patent Act
The Patent Act finds infringement due to negligence in addition to intention and negligence ispresumed. Therefore, there were not many concerns related to demonstration of intention in the caseof compensation for damages. The judgment on the demonstration of intention becomes very
important for enhanced damages and consideration of the following eight elements became essential.
Article 128 of the Patent Act (Compensation for damage) (8) Courts are authorized to determine
damages of up to three times the amount of damages that are found pursuant to the provisions ofparagraphs (2) through (7) regardless of the provisions of paragraph (1) in cases where theinfringement of patent rights or exclusive licenses of others are found to be intentional acts.
(9) When judging the amount of damages pursuant to paragraph (8), the matters in the following
items must be considered:(i) whether the infringer has a dominant position;(ii) the degree of intention or the degree that the infringer recognizes the concerns of thedamages;(iii) the significance of damages to the patent owner and exclusive licensee from theinfringement;(iv) the economic benefits to the infringer from the infringement;(v) period and frequency of the infringement, etc.;(vi) the amount of the fine for the infringement;(vii) the infringer's financial status at the time of infringement; and(viii) the degree of effort that the infringer made to relieve the damages.
5.

Judgment Method of Enhanced Damages in the US(1) Development of Major Court PrecedentsxiIn the case of Seymour v. McCormick in 1836, the US Supreme Court for the first time adopted
the principle of law that the court may determine enhanced damages at its discretion based on
intentional infringement.
In the case of Underwater in 1983, the court expressly stated that the infringer must undertakethe proactive obligation that the infringer must obtain a lawyer’s opinion in writing in order to avoid
intentional infringement.
However, in the case of Seagate in 2007, the court abolished the standard of Underwater since
the infringer is not obliged to obtain a lawyer’s opinion and presented the two-part test as follows:
the patent owner is required to present clear and convincing evidence of the objective recklessnessof the infringer that (i) an infringer acted despite an objectively high likelihood that his/her actions
constituted infringement of a valid patent; and (ii) the risk of infringement was either known or so
obvious that it should have been known to the accused infringer.
In the case of Halo in 2016, the court abolished the two-part test based on the grounds thatthe two-part test is excessively strict and it may release the intentional and malicious infringer fromthe responsibility for enhanced damages. And the patent owner should demonstrate the subjective
willfulness of the infringer with dominant evidence based on the criteria of intentional infringement.
(2) Judgment of Intention and Enhanced Damages
The US Federal Circuit listed nine elements that can be referred to as the criteria for intention
based on circumstantial evidence in the judgment, Read Corp. v. Portec, Inc. 970 F.2d 816 (Fed. Cir.
1992). All the following elements need not be referred to and judgment as to whether it is anintentional infringement or not may be made partially by circumstantial evidence. In particular, after
the judgment in Halo, Read Factors are still applied to the judgment on enhanced damages.
(i) Whether the infringer was deliberately copying(ii) Whether the infringer had a good faith belief that the patent was invalid or not infringed(iii) The infringer's behavior during the litigation(iv) The infringer's size and financial condition(v) The closeness of the case(vi) The duration of defendant’s misconduct(vii)Remedial action by the infringer(viii) Infringer’s motivation for harm(ix) Whether the infringer attempted to conceal its misconduct

xii

6.

Issues of the Enhanced Damage System of the Korean Patent Act and Its Future Issues
Concerning issues related to whether gross negligence, etc. is included in addition to intention

or how far intention is required, “gross negligence” was included in addition to intention in the draftof the amendment of the Patent Act; however, it was deleted when the amendment passed Congressin January 2018. It seems that a malicious level, which is a higher level than general intent, is required.
In the future, in Korea, the number of claims for damages up to three times will increase more than
general damages. It gives concerns about longer lawsuits and more social costs. Large companies
may be able to prepare to an extent; however, in cases of small and medium companies, if they do
not obtain a lawyer’s opinion in writing, the possibility to become an intentional infringer increases.

V. Conclusionxiii