Whether the restriction on participation in projects for promoting technological innovation provided for in Article 20 and Article 21 [Attachment Table 2] 1 (a) and (c) of the former Enforcement Decree of the Act on the Promotion of Innovation of Small and Medium Enterprises, and the restriction on the recovery of contributions, should be separately determined on whether “unfaithed performance of research and development courses” and “ extremely poor performance of research outcomes” should be separately determined (affirmative), and whether the failure of research and development process is presumed to be performed if it is extremely poor (negative)

Articles 31 and 32 of the former Act on the Promotion of Technological Innovation of Small and Medium Enterprises (Amended by Act No. 11538, Dec. 11, 2012); Articles 20 and 21 [Attachment Table 2] subparag. 1(a) and (c) of the former Enforcement Decree of the Act on the Promotion of Technological Innovation of Small and Medium Enterprises (Amended by Presidential Decree No. 24586, Jun. 11, 2013); and Articles 20 and 21 [Attachment Table 2] of the former Enforcement Decree of the Act on the Promotion of Technological Innovation of Small and Medium Enterprises (Amended by Presidential Decree No. 24586, Jun. 11, 2013); and in addition, even if the research findings are extremely poor, the degree of sanctions depending on the degree of the performance of the research process should be separately determined, and it is not presumed that the research outcomes are extremely poor.

Furthermore, the “faithly performing the research and development process” stipulated under the above Enforcement Decree ought to be reasonably determined according to social norms, comprehensively taking into account all the circumstances, including the details of the project plan that is the premise for the research and development project, the specific progress of the project, and the violation of the agreement, which is the basis of the project. In such cases, where the research and development process is successively conducted through multiple progress stages, the connection between the overall process of research

Articles 31 and 32 of the former Act on the Promotion of Technology Innovation of Small and Medium Enterprises (Amended by Act No. 11538, Dec. 11, 2012); Article 20(1) (see current Article 20(2)); Article 21(1) [Attachment 2] subparag. 1(a) and (c) (see current deletion) of the former Enforcement Decree of the Act on the Promotion of Technology Innovation of Small and Medium Enterprises (Amended by Presidential Decree No. 24586, Jun. 11, 2013)

Lee-rating Co., Ltd. and two others (Law Firm Jeong, Attorneys Kim Il-soo et al., Counsel for the plaintiff-appellant)

The Director of the Technology and Information Promotion Agency for Small and Medium Enterprises (Law Firm, Attorneys Park Si-hwan et al., Counsel for the plaintiff-appellant)

Daejeon High Court Decision 2014Nu10224 decided December 11, 2014

The judgment of the court below is reversed, and the case is remanded to Daejeon High Court.

The grounds of appeal are examined.

1. Articles 31 and 32 of the former Act on the Promotion of Technology Innovation of Small and Medium Enterprises (amended by Act No. 11538, Dec. 11, 2012; Act No. 11538, Jun. 12, 2013) provide for the grounds for restrictions on participation in, and the recovery of contributions for, technological innovation promotion support projects, including “where the outcomes of research and development are extremely poor (Article 1)” as well as the grounds for restrictions on participation in, and the recovery of, the contributions, and specific grounds for sanctions and disposition standards therefor are delegated to Presidential Decree. Following delegation, Articles 20 and 21 of the former Enforcement Decree of the Act on the Promotion of Technology Innovation of Small and Medium Enterprises (amended by Presidential Decree No. 24586, Jun. 11, 2013) [Attachment 2] are extremely poor if a small and medium enterprise owner, etc. who participated in a project for the promotion of technological innovation has faithfully performed the research and development process for three years [Article 1(a) of the above provision of restriction on participation]

In addition, considering the purport of imposing sanctions on the restriction on participation, the structure and content of the statutes on the recovery of contributions, and the fact that the enforcement decree of this case differs depending on the degree of sanctions depending on the degree of the performance of the research and development process even in cases where the research results are extremely poor, it shall be separately determined on the grounds of sanctions under the enforcement decree of this case, “indecent performance of the research and development process” and “in extremely poor research results,” and it shall not be presumed that the research results are extremely poor.

Furthermore, the “faithly performing the research and development process” stipulated in the provisions of the Enforcement Decree of the instant case ought to be reasonably determined according to social norms, comprehensively taking into account all the relevant circumstances, including the content of the project plan that is the premise for the research and development project, the specific progress of the project, and the violation of the agreement, which is the basis of the project. In such cases, where the research and development process is conducted in a successive order through multiple progress stages

2. As to whether the result of the instant project project implementation is extremely poor

In light of the aforementioned legal principles and records, the lower court was justifiable to have determined that the outcome of the instant project project was extremely poor on the ground that the degree of attainment of light volume items of the instant project tasks was 2.4%. In so doing, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal principles on deviation and abuse of discretionary power.

3. As to whether the instant business task was performed in an unfaithful manner

A. According to the reasoning of the judgment below, in order to achieve the goal of the instant project task, the court below determined that the instant project task was performed faithfully on the ground that, on the premise that it is very important factor to design siren light to be used in the professional project project project project project project project project project project project project project project project project project project project project project implementation without a studio, the Plaintiffs began to engage in siren design and external production request, etc. only seven months after the entire one-year research and development period.

B. However, the lower court’s determination is difficult to accept for the following reasons.

The reasoning of the lower judgment and the evidence duly admitted by the lower court reveal the following: (a) the design of the optical structure, including sirens, may proceed after the selection of the PE parts, and the time is delayed at the earlier stage; (b) the Plaintiffs produced drawings and prototypes by considerable effort in order to achieve the objectives of the instant project task; and (c) the Defendant did not point out any particular points in the detailed evaluation of the “reliability in technology development” while visiting the Plaintiff Company as part of the evaluation of the project task; and (d) did not point out any error in the research and development process other than pointed out the insufficient result in the process of examining the instant disposition and the Plaintiffs’ objections thereto.

Examining the above facts in light of the aforementioned legal principles, in light of the Plaintiffs’ entire research and development process and their importance of the ene development stage, etc., it cannot be readily concluded that the research and development of the instant task was performed faithfully by considering the entire research and development of the instant task as a whole solely on the ground that the Plaintiffs began late

C. Nevertheless, the lower court did not specifically examine the causes for failure to implement the process of research and development project in the initial project plan, whether the Plaintiffs violated their obligations under any agreement in the course of research and development, etc., and determined that the Plaintiffs performed the instant project task in an unfaithful manner on the sole basis of the circumstances indicated in its reasoning. In so doing, the lower court erred by misapprehending the legal principles on restrictions on participation and the grounds for recovery disposition under the Enforcement Decree of the instant case, and failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment

4. Conclusion

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices.

Justices Jo Hee-de (Presiding Justice)