Wednesday, January 30, 2013

Protecting Trade Secrets in Korea: Top 5 Things to Know Before Subjecting your Business Secrets to the Korean Market

We receive emails, regularly, requesting advice on the protection of IP rights in Korea and China.   Most of the issues I addressed in this blog come from these questions.  I realized, after writing over 900 posts on this blog, that I never drafted a post on trade secrets.  Don't blame me, blame my paralegal. :)

Definition of Trade Secret
As you probably know, a trade secret is, simply any design, process, formula or the like that is not known or readily ascertainable by a third party that may provide an economic benefit to the individual possessing the trade secret.  Notwithstanding, non-compete and non-disclosure agreements, Korea and most countries, typically, only protect trade secrets against an alleged violator when the alleged holder of the trade secret makes a "reasonable effort" to protect the trade secret and is able to establish that it has made this reasonable effort to protect the trade secret.

Protection of Trade Secrets in Korea
1.  Identify your Trade Secrets.  Draft a document in English and Korean identifying the trade secrets of your company.  This does not mean you need to write down the specific details of the trade secret.  Example: Formula for the Manufacturer of a Black Carbonated Beverage better known as Classic Coke. 

2.  Non-Disclosure & Non-Compete Agreements.  Have all that you do business with sign detailed and Korean-specific Non-Compete and Non-Disclosure Agreements.  Include a liquidated damages clause in these agreements.  These agreements should be executed by all suppliers, employees, directors and others in Korea that you are doing business with.

3.  Put in Place a Trade Secret Protection Scheme.  Before creating a trade secret protection scheme please consider how your trade secret is likely to be misappropriated by others - think, at a minimum, employees, vendors, suppliers and customers.   After the analysis, write down the scheme and integrate the scheme into your business.  We strongly advise discussing the scheme with a business or legal consultant.

4.  Due Diligence.  Due Diligence in hiring, firing, engagement with outside business partners and vendors.

5.  Enforce Your Rights.  If you are not willing to enforce your rights in a Korean court - you will, likely, become known as a company with softball managers and will, thus, likely be the victim again in the future.  Don't forget even the large Korean conglomerates are engaged in litigation to protect their IP - some of this litigation is, simply, to defer future violators.

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Sean Hayes is co-chair of the Korea Practice Team at IPG Legal.
He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty.

SeanHayes@ipglegal.com