Companies Victimized by Technology Theft by Large Corporations: "Shift Burden of Proof and Impose Punitive Damages" [Choi Seokjin's Law & Biz]

Shift the Burden of Proof and Introduce Punitive Damages
Large Corporations Deploy "Endurance Tactics" Using Vast Capital
Eight Years Since Filing Suit, Litigation Still Ongoing
Urgent Need to Increase Intellectual Property Office Investiga

According to the "2025 Survey on the Status of SME Technology Protection," published by the Foundation for Large, Small, and Medium Enterprises and Agriculture, the estimated total loss incurred by domestic SMEs due to technology or business information infringement in South Korea in 2024 amounted to approximately 1.0893 trillion won. The types of information infringed were design drawings (43.6%), business information (21.8%), and software and programming files (21.0%), in that order.

On April 7, at the Korea Federation of SMEs in Yeouido, Seoul, The Listening Foundation (Chairman Jang Taegwan), Independent Assemblyman Paek Jongmin, and Assemblyman Song Jaebong of the Democratic Party of Korea jointly hosted a "Press Briefing for Small and Medium-Sized Enterprises Affected by Technology Theft."

On the 7th, the 'Press Briefing for Small and Medium-Sized Enterprises Affected by Technology Theft' was held at the Korea Federation of SMEs in Yeouido, Seoul. The Listening Foundation

On this day, four companies claiming to be victims of technology theft by large corporations spoke out in unison about the damages caused by prolonged disputes, appealing to the government and the National Assembly to come up with countermeasures. The CEOs of each affected company described the process by which technology theft occurred, subsequent dispute developments, and shared their opinions on how the system should be improved to better protect SME technologies.

NECPower vs. SK ecoplant

NECPower, a company developing AI-based incinerator operation optimization solutions, is currently involved in an intellectual property dispute with Seongnam City and SK ecoplant.

In 2020, Seongnam City included NECPower's patented technology in its proposal for the Ministry of Environment's "Smart Green City" contest, won the bid, but then excluded NECPower from the main contract. Later, SK ecoplant approached NECPower after learning of the contest win, promising a private contract and requesting a proof of concept (PoC). During this process, NECPower alleges that SK ecoplant extracted core technologies containing 15 years of know-how, including the "drying section temperature sensor location drawing" and the "one-minute DB item definition document," under the pretense of technical validation, but then abruptly canceled the contract. Furthermore, NECPower claims that just one year later, SK ecoplant rebranded the solution as its own, launching a large-scale commercialization under the name "ZERO4 WTE."

NECPower is currently pursuing a civil lawsuit against Seongnam City for suspected technology misappropriation and unfair exclusion. Regarding SK ecoplant, NECPower has received acknowledgment from the Foundation for Large, Small, and Medium Enterprises and Agriculture that there is a potential violation of the Unfair Competition Prevention Act. Based on this, with legal support from The Listening Foundation, NECPower is preparing to file a report with the Korea Fair Trade Commission and the specialized police unit for intellectual property under the Korean Intellectual Property Office.

Shim Jaeyong, CEO of NECPower, stated, "Our company's innovative technology, developed over 15 years and recognized by 23 countries including the United States, is used as 'bait' for domestic government projects and exploited by large corporations as a 'publicity tool' for ESG management, while in overseas public works, we are discarded once our technology is used. This is the grim reality of Korea's technology ecosystem. Even when a large corporation steals our intangible AI algorithms, it is nearly impossible for an SME to prove it—like trying to break a stone with an egg."

He added, "If there is even a slight similarity in the proposed technology, the burden of proof must be shifted entirely to the accused company, making them demonstrate their independent development process. This strict shifting of the burden of proof must be legislated."

SK ecoplant has stated, "There has been no technology theft or misappropriation."

CGI vs. Hanwha Solutions

CGI, a company specializing in high-efficiency thermal management solutions for various electronic equipment and the automotive industry, began joint development of ultra-thin vapor chambers for mobile devices using laser bonding technology with Samsung Electronics in early 2017. By November of the following year, they had succeeded in preliminary development. CGI’s products have since been applied to various Samsung mobile phone models, including the Galaxy S10, NOTE20, and Z Flip.

However, after former Samsung executives who had worked with CGI moved to Hanwha, Hanwha Solutions approached CGI in 2021, expressing interest in acquiring CGI's technology and proposing a merger and acquisition (M&A). Both sides even signed a non-disclosure agreement (NDA) regarding the potential acquisition. Following this, Hanwha Solutions requested an extensive due diligence process covering 303 items, through which CGI claims that their manufacturing processes, trade secrets, and all business division information and know-how were handed over to Hanwha Solutions.

STS material 0.3T vapor chamber applied in the Galaxy S21 FE model. CGI

According to CGI, Hanwha Solutions then offered an acquisition price that was about half of CGI’s proposal, causing the deal to collapse. Immediately after abandoning the acquisition, Hanwha Solutions established a new thermal management subsidiary, Hanwha NxMD, and within six months, placed an order for a mobile vapor chamber production line at a factory in Thailand, beginning mass production of products using the same ultra-thin vapor chamber technology developed by CGI.

In August 2023, CGI applied for mediation of the technology dispute with the Ministry of SMEs and Startups, but in February 2024, the mediation failed due to differences between the parties. Eventually, in October 2024, CGI filed a criminal complaint with the Chungnam Provincial Police Agency’s Industrial Technology Security Investigation Unit against Hanwha NxMD for violations of the Industrial Technology Protection Act and the Unfair Competition Prevention Act. In June last year, the police conducted a search and seizure of Hanwha NxMD and three mobile production line equipment manufacturers, and the case was revealed in the media and at a National Assembly audit. Nevertheless, Hanwha continues to deny any technology theft.

Choyoungsu, CEO of CGI, stated, "Hanwha Solutions approached us under the pretense of M&A, secured all our core technologies during the due diligence process, then unilaterally broke off negotiations. Afterward, they established a subsidiary, set up a factory, and began mass-producing similar products for supply to Samsung Electronics in just six months using the same technology. This is clear circumstantial evidence of technology theft."

He also said, "Due to large companies’ legal strategies and stalling tactics, SMEs inevitably face severe business difficulties. The government and the National Assembly must respond to technology theft crimes with more prompt and stringent investigations."

He pointed out, "In the United States, companies accused of technology theft must prove the development process of the stolen technology, pay compensation of more than three times the sales generated by the technology, and are banned from distributing it domestically. In Korea, however, the burden is on the victim to provide direct evidence, and even if proven, compensation is minimal."

He continued, "Companies that steal technology must be driven out of the market. While legal amendments take time, strong will can apply existing laws comprehensively to impose sanctions—such as prosecuting for fraud, requiring thorough public disclosure related to technology theft, and conducting tax audits on the R&D expenses of the offending company. We need the will to fully utilize current laws."

Finally, Choyoungsu said, "Globally, business ecosystems work by having venture companies develop technology and global corporations scale up and mass-produce. Technology theft from venture companies is a serious matter that undermines the very foundation of business activities. Korea must face the reality that its venture companies are uniquely unable to grow."

Hanwha Solutions responded, "Our subsidiary NxMD conducted due diligence with CGI to promptly pursue new business in electronic materials and components, but the deal failed due to differences in acquisition price expectations. There was no theft of CGI’s technology. NxMD, after the failure of negotiations, developed its own technology based on already public mass production techniques in the industry, drawing on various technical consultations from domestic and international research institutes."

TOrder vs. KT Corporation

TOrder, which holds a 65% share of the domestic table-order platform market, was first approached by KT Corporation in 2022 for business cooperation. TOrder, trusting the partnership, shared key business information. However, KT Corporation abruptly ended discussions just before signing a non-disclosure agreement, and in May 2023, launched its own table-order service "HiOrder," which TOrder claims had a business model and UI similar to theirs.

During this process, KT allegedly abused its position as a telecommunications carrier by artificially restricting the internet lines (about 14–15 lines) of stores using TOrder, thereby disrupting their normal operations and encouraging a switch to KT's own service. This was reportedly confirmed through recorded phone calls of KT’s sales staff.

Furthermore, in 2025, KT executives, including senior management, explored the possibility of an M&A as part of their cooperation proposal. TOrder provided core technology structures, trade secrets, and roadmaps through an extensive due diligence questionnaire (DDQ) with over 1,000 questions. However, KT again unilaterally announced the end of discussions, and TOrder claims that KT used the information it had acquired to enhance its own service.

TableOrder product manufactured by TOrder. TOrder official website

The core of the table-order service technology lies in the on-site optimization know-how accumulated over years by processing various variables and data generated from hundreds of thousands of tablets. TOrder asserts that such technology structures and data management logic cannot be physically replicated or acquired by latecomers in a short period and that their unique assets have been copied not just in visible UI elements but across the entire business model and operational architecture.

In July 2023, TOrder filed a criminal complaint against KT, but the police decided not to refer the case for prosecution. TOrder is currently reviewing additional legal actions, including further complaints and reports to the Korea Fair Trade Commission.

Kwon Sungtaek, CEO of TOrder, commented, "Startups often find it difficult to raise objections to unfair practices during discussions of cooperation or M&A with large corporations for fear of business ties being cut off. It has become a norm that after sharing core technology and business secrets under the guise of cooperation, large corporations repeatedly and unilaterally end negotiations."

He added, "It is nearly impossible for startups to exercise equal rights of defense against large corporations with overwhelming capital and legal teams. Therefore, legal provisions must be established to strengthen the burden of proof on large companies regarding the use of information provided during negotiations. In addition, practical solutions are urgently needed, such as introducing a 'technology damage provisional escrow' system to protect the value of technology and support liquidity for victim companies during disputes."

KT Corporation stated, "KT has never implemented a policy to artificially restrict the number of internet lines, nor has the headquarters instructed or been involved in directing its sales agencies to use such tactics."

Left photo - Late Chairman Ji-Won Kim, founder of CDS Global (far left), and CEO Jiwan Kim (far right). Right photo - Bamboo salt formulation supplied by CDS Global to Insanga. CDS Global

CDS Global vs. Insanga

The late Chairman Kim Ji-Won, founder of CDS Global, a company specializing in manufacturing heat treatment equipment, researched technology since the 1980s that could achieve complete combustion of combustible materials at high temperatures and speeds using centrifugal separation based on rapid air rotation, without auxiliary devices or fuels.

Applying this complete combustion technology, CDS Global entered the heat treatment equipment manufacturing business. In 2008, the company was commissioned by Insanga, Korea’s top bamboo salt manufacturer, to develop and supply a bamboo salt melting furnace. After signing a supply contract, CDS Global began delivering bamboo salt melting furnaces to Insanga from April 2009, also providing completion drawings.

Bamboo salt must be roasted a total of nine times; from the first to the eighth roast at low temperatures and the ninth at temperatures above 1,600 degrees Celsius. The equipment for reaching such high temperatures is the bamboo salt melting furnace.

To prevent technology leakage, CDS Global did not file a patent, but instead registered the high-temperature complete combustion technology (as original technology) and managed its application in various industries as a trade secret. However, CDS Global claims that in 2016, seven years after supplying Insanga, as Insanga was preparing for a public listing, Insanga applied for and obtained a patent using a design nearly identical to the completion drawings provided by CDS Global.

At the time, Insanga had no technical personnel or design/manufacturing capabilities for mechanical devices, and to this day, apart from the bamboo salt melting furnace, Insanga only holds patents for food manufacturing methods. Therefore, CDS Global argues that Insanga could not have obtained the patent through independent research and development.

Jukyem Melting Furnace developed by CDS Global. CDS Global

Upon belatedly learning of Insanga’s patent registration, CDS Global filed a lawsuit in July 2018 seeking damages and patent transfer. The case, initially assigned to a single judge, was transferred to a panel in February 2020. The first trial ruled partly in favor of the plaintiff, and in March 2023, the Patent Court (appellate court) recognized Insanga's technology theft and ruled entirely in favor of CDS Global, seemingly resolving the case.

However, Insanga retained a large law firm, including two former judges—one who served as a Supreme Court researcher and another as a former Patent Court judge—and filed an appeal. Contrary to industry expectations that the case would be summarily dismissed, the Supreme Court’s proceedings were delayed, and it was not until August last year, 2 years and 4 months after the appeal was filed, that a chief justice and panel were assigned to the case. As of 2026, eight years after the initial filing in 2018, the final verdict is still pending.

During the prolonged litigation, CDS Global’s business circumstances deteriorated, ultimately leading to closure, and inventor Chairman Kim passed away in April 2022.

Kim Jiwan, CEO of CDS Global, stated, "Currently, if a large corporation registers a patent under its own name after stealing an SME's technology, there is no legal mechanism to ensure damages or determine compensation. Such provisions must be codified, and damages should be punitive to deter technology theft. Otherwise, large companies may believe that if caught, they can simply return what they took with no real consequences."

He continued, "Large corporations use their vast resources to hire major law firms and then resort to 'waiting games' until SMEs collapse from financial distress. Therefore, thorough monitoring and swift, strict sanctions at both government and local government levels are essential."

Meanwhile, Insanga stated, "Insanga possesses original technology and has no connection to the issue of technology theft. CDS Global, a furnace manufacturer, has no connection to the bamboo salt market, and their claims are not factual."

Furthermore, Insanga argued, "The patent in question was invented by our employee, and CDS Global only acted as a contractor for the bamboo salt melting furnace at our request. This was a joint creative effort, not a case of CDS Global’s proprietary technology being stolen."

Government Launches Pan-Governmental Response Team... SME Technology Theft Whistleblower System Established

In December of last year, President Lee Jaemyung stated during a Ministry of Trade, Industry and Energy, Intellectual Property Office, and Ministry of SMEs and Startups work briefing that "technology theft is not just an issue for SMEs, but has become a matter of national capability worldwide." After confirming that there were only 25 technical police officers at the Intellectual Property Office, he mentioned the need for additional appointments to expand personnel.

The President also directed, "The maximum penalty of 2 billion won for technology theft is too low. Criminal penalties are hard to enforce and ineffective, so consider raising fines to ensure real deterrence—calculate penalties as a proportion of sales or several times the illicit gains from the technology theft."

In January, the government launched the "Pan-Governmental Response Team for Eradicating SME Technology Theft," bringing together six key ministries and agencies for technology protection: the Ministry of SMEs and Startups, the Ministry of Trade, Industry and Energy, the Korea Fair Trade Commission, the Intellectual Property Office, the National Police Agency, and the National Intelligence Service. As the first collaborative outcome, the "SME Technology Theft Whistleblower System" was established at the end of last month.

A current senior prosecutor with extensive experience in technology leak investigations commented, "It is absolutely critical to expand the pool of professional investigators who can determine whether information meets the requirements of 'trade secrets' under the Unfair Competition Prevention Act, such as secrecy, economic usefulness, and secret management."

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