If SMEs' Technology Is Stolen, Compensation Will Be Triple the Damage Amount

[Asia Economy Reporter Kim Jong-hwa] If small and medium-sized enterprises (SMEs) unfairly use or provide technical data, they must pay triple the amount of damages, and Non-Disclosure Agreements (NDA) will also be mandatory.

On the 17th, the Ministry of SMEs and Startups announced that a partial amendment to the "Act on the Promotion of Mutual Growth between Large and Small Enterprises (Mutual Growth Act)," focusing on these measures to eradicate technology theft from SMEs, has passed the Cabinet meeting.

Although the government has prepared and implemented measures such as the "Measures to Eradicate Technology Theft from SMEs" to protect SME technology, there have been calls for fundamental institutional improvements as damages to SMEs have continued.

The core of this amendment is the "mandatory NDA" and "punitive damages." First, when a subcontracted company provides technical data to the contracting company, signing an NDA is mandatory, and failure to comply will result in a fine of up to 10 million KRW.

This is a measure to establish a culture of NDAs domestically to prevent technology theft and effectively protect SME technology. The Ministry of SMEs and Startups plans to actively support smooth NDA signing in the field by preparing a "standard NDA" and providing it to both large and small enterprises as a follow-up measure.

It is also prohibited for the contracting company to unfairly use or provide the subcontracted company's technical data for itself or a third party. If the subcontracted company suffers damages due to unfair use or provision of technical data, the contracting company is required to compensate up to three times the amount of damages.

Although punitive damages provisions for unfair trade practices under related laws and the Mutual Growth Act are already in effect, they have been included in this amendment as well. The introduction of a punitive damages system was urgent to prevent intentional and malicious unfair use or provision of technical data in inter-company transactions and to provide reasonable compensation to the damaged companies.

To reasonably calculate the amount of damages, provisions on the method of recognizing damages have also been established. In damage claim lawsuits, if the subcontracted company claims a violation of the law, the contracting company must present evidence regarding its specific actions. In other words, the burden of proof on SMEs (subcontracted companies) has been alleviated. Additionally, a new provision allows the court to order the submission of evidence necessary to prove the violation or calculate damages in damage claim lawsuits.

Kim Hyun-sung, Chief Attorney at Law Office Top (legal advisor to the Ministry of SMEs and Startups, specialist in IT venture field), said, "This amendment establishes preventive and punitive regulations to eradicate technology theft from SMEs, which will serve as an opportunity to take a step forward in establishing a fair mutual growth culture."

Choi Won-seok, Chief Attorney at Law Firm Trinity (legal advisor to the Ministry of SMEs and Startups, specialist in fair trade), evaluated, "With this amendment to the Mutual Growth Act, it is now possible to prevent the ongoing theft of technology owned by SMEs in advance. Also, SMEs that suffer damages from unfair technology theft can now file claims with reduced litigation burdens and reasonable compensation, meaning that SME technology is protected legally and institutionally."

This content was produced with the assistance of AI translation services.