Lee Past Co., Ltd. (Law Firm Barun, Attorneys Cho Il-il et al., Counsel for the defendant-appellant)

Respondent 1 and two others (Law Firm UBS, Attorneys Choi Sejong-hoon et al., Counsel for the defendant-appellant)

Suwon District Court Order 2009Kahap235 dated January 20, 2010

1. The decision of the first instance shall be revoked;

2. The provisional disposition order rendered on September 30, 2009 by the above court as to the application case for prohibition of competition and provisional disposition against infringement of trade secrets between the claimant and the respondent in Suwon District Court 2009Kahap91 was revoked.

3. All applications for provisional disposition against the respondent that has been changed in exchange in the trial are dismissed;

4. The total cost of the lawsuit shall be borne by the applicant;

1. Purport of request by the applicant;

A. The respondent 1 shall not be employed by January 18, 2013, while the respondent 2 shall not be employed in Solus Co., Ltd. other than the filing of an application and by October 31, 2013 or by other means to provide labor to the above company.

B. The respondent shall not disclose or use each trade secret listed in the separate sheet of trade secret 1 to any person other than the applicant.

C. The respondent may not manufacture and sell products which imitate the form of Fluore 393 Ganul, a form of Fluore, in the list of functional salt in attached Form 1 or fluore bags.

(d) The enforcement officer shall give public notice of the purport of the above order in a proper manner.

E. Where the respondent violates the above paragraph (a) above, 1,000,000 per day of each violation shall be paid to the applicant.

(A) In the trial, the applicant changed the purport of the application to replace the list of trade secrets from the annexed sheet 2 to the annexed sheet 1. This is to clearly specify the trade secrets claimed by the applicant for protection, and it is deemed that the change within the permissible scope in the procedure of the provisional disposition

2. Respondent's objection and purport of appeal

The decision of the court of first instance shall be revoked. The above court's provisional disposition order (hereinafter "the provisional disposition order of this case") made on September 30, 2009 between the applicant and the respondent with respect to the case of application for injunction against competition and trade secret infringement prohibition against Suwon District Court 2009Kahap91 among the respondent and the respondent shall be revoked, and all applications for provisional disposition against the respondent shall be dismissed.

1. Decision on provisional disposition of this case and decision of the first instance court

A. On September 30, 2009, the above court accepted part of the applicant’s application on September 30, 2009 and rendered a provisional disposition order with the following contents as to the application filed by the Suwon District Court 2009Kahap91 and a provisional disposition prohibiting trade secret infringement against the respondent.

1) The respondent 1 shall not be employed by January 18, 201, while the respondent 2 shall not be employed in Solus Co., Ltd. other than the filing of an application and by October 31, 201, or shall not provide labor to the above company by other means.

2) The respondent shall not disclose or use each trade secret listed in the separate sheet 2 trade secret to any person other than the applicant.

3) The respondent may not manufacture or sell products which imitate the form of S-FGR Ganule, f.B.A. S-FGR Ganule, in the attached Table 2 functional salt rates or the list of marc bagss.

4) The enforcement officer shall give public notice of the purport of the order in a proper manner.

5) We dismiss the remainder of the respondent.

B. On November 16, 2009, the respondent filed an objection with the above court No. 2009Kahap235 on November 16, 2009, but on January 20, 2010, the first instance court decision authorizing the provisional disposition order was issued.

2. Determination on the right to be preserved

(a) Facts of recognition;

According to the records and the purpose of the whole examination, the following facts are substantiated.

1) The applicant has been established in 192 and performs the duties of manufacturing, selling, exporting, etc. functional salt charges, internal medicine charges, etc. used in electronic equipment, etc.

2) On April 1, 2006, the respondent 1 was employed as the head of the technical research institute as the applicant company on January 18, 2008, and the respondent 2 was employed as the head of the business division on February 20, 2006, and the respondent 2 retired on October 31, 2008, and the respondent 1 and 2 was the applicant company on January 2, 2008, prior to the resignation of the applicant company. On January 2, 2008, the respondent 1 and the respondent 2 were the director and the representative director, and the respondent 2 are the auditor respectively.

3) The respondent 3 entered into a contract for goods supply with the applicant from September 2004 to February 2009, and operates the "○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○”).

4) At the time of joining the applicant company, the respondent 1 and 2 promised to strictly comply with the following requirements during the period of working [the matters concerning research and development of new products and technology], [the matters concerning the production and production process], [the matters concerning the quality control], [the matters concerning sale and business], and [the matters concerning other management policies and duties obtained and causing enormous damage to the company when it comes to others/others], and the period of at least three years after resignation, and they do not transfer to the same industry or establish the same company within at least three years after resignation. 2. The respondent 1 and 2 did not interfere with the business of the company by filing a patent application related to the above matters obtained while working for the company. 3. Then, each of the above pledges was prepared for a period of at least 10 years after the retirement of 200 years after the retirement of the company (no more than 10 years after the retirement of 200 years after the retirement of the company)."

B. Issues

1) Applicant's assertion

A) Information listed in the [Attachment 1] Trade Secret List (hereinafter “information of this case”) is a trade secret with independent economic value, not generally disclosed as the applicant’s database manages the content of the information as it is based on the combination, manufacturing, etc. of soft products and lusium products, quality control methods, business data, etc., which are functional salt of the applicant.

B) On January 2, 2008, the respondent 1 and 2 had the duty to prohibit competition and maintain trade secrets against the applicant under each of the written pledges of this case, but they acquired the above trade secrets for the purpose of obtaining unjust profits or causing damage to the applicant, and also established the solux of the same type of business as the respondent 3 around January 2, 2008, before the withdrawal of the applicant company.

C) Solus are manufacturing and selling the same product as the F.B.A. S-FGR Ganll (the name at the trial changed to C.I. Fluore 393 Ganule; hereinafter “instant product”). The instant product was converted into a separate form of a product. The respondent, in Solus, made a product that imitates the form of the instant product, such as the color of the product, the strings, and the strings and patrols, and sells it to Sejong Island, etc. The product constitutes an unfair competition act under Article 2 subparagraph 1 (i) of the Unfair Competition Prevention and Trade Secret Protection Act (hereinafter “Act”).

D) The applicant, as a holder of trade secrets, sought provisional disposition such as the purport of the application against the respondent in order to prevent the infringement of the respondent’s business interests due to the infringement of trade secrets and the breach of duty not to engage in competitive business, and to seek the prohibition of unfair competition due to reproduction.

2) Respondent's assertion

A) The instant information is merely merely a well-known information, and does not constitute an applicant’s trade secret or an applicant’s knowledge or information. Respondent 3 merely engages in a business by utilizing its own business know-how and thus cannot be said to infringe the applicant’s trade secret solely on the ground that the applicant is a director of Solulus.

B) The respondent does not produce each product listed in the separate sheet No. 1 functional salt or marbial booms list, including the product of this case, and only sells the product manufactured by another company.

C) Article 103 of the Civil Act provides that the Respondents 1 and 2’s freedom of occupation and right to work, etc. are excessively restricted and threatened with livelihood. Accordingly, the Respondents 1 and 2 did not have sufficient explanation or explicit consent when preparing each of the instant pledges.

3) Issues

○ Whether the respondent violated trade secrets

Whether it constitutes an unfair competition act due to ○ copying of the form

○ Whether the respondent 1 and 2 bears the duty of prohibition of competition

C. Whether trade secrets were infringed

For the following reasons, it is difficult to recognize the respondent's trade secret infringement.

(i)the specification of trade secrets;

○ There is no sufficient vindication to identify the instant information as a trade secret of the applicant.

Trade secret refers to a production method, sale method, and other technical or managerial information useful for business activities, which is not generally known and has an independent economic value, and maintained and managed as confidential by considerable effort. The meaning of "the information has an independent economic value" is that the holder of the information can benefit from competition to the competitor through the use of the information, or that considerable cost or effort is needed for the acquisition or development of the information (Supreme Court Decision 2005Do6223 Decided February 15, 2008).

In order to issue an order to prohibit infringement of trade secrets, the trade secrets must be specified. However, in order to determine whether trade secrets claimed by an employer meet the requirements for trade secrets and whether trade secrets are specified as trade secrets, the trade secrets claimed by an employer should be considered not only in the trade secrets itself, but also in the work period, work in charge, position, possibility of access to trade secrets, contents and nature of work in the former company, relationship between the employer and the former company (Supreme Court Order 2002Ma4380 Dated July 16, 2003).

In light of this point, the respondent 1, who has worked as the head of the technical research institute of the applicant company, has access to the technical information listed in [Attachment 1] List 1 and 2 (hereinafter “technical information of this case”), and the respondent 2, who has worked as the head of the business department, was likely to have access to the business information listed in [Attachment 3]. The respondent 2, who has worked as the head of the business office, is deemed to have had considerable technical capabilities and know-hows related thereto, and as long as he is engaged in the business related to functional salt related to the former in the so-called so-called so-called so-called "business information of this case, he may apply somewhat mitigated standards to the recognition of the trade secret

However, considering the following circumstances, even based on the relaxed standards, the applicant’s explanation is insufficient to deem that the instant information constitutes a trade secret or became a trade secret.

① Of the instant technical information, the applicant only specifies the technical information listed in the [Attachment 1] List of Trade Secrets as “satisfying rate, synthetic reaction data, manufacturing method, and distribution method,” and does not expressly state the specific mixing of specific products or manufacturing method as indicated in the [Attachment 1] List of Fluor Madic Bags or Madic Bags in detail (the applicant’s explanation on the product development and manufacturing process of “Plaf Bac S-HB” recorded in the preparatory document dated 6, 2009 of the first instance trial is merely a general explanation on the order and content of each process, and without presenting or mentioning the manuals, numerical data, and the name or content of the report).

② In addition, the technical information of this case includes quality control information listed in attached Table 2 of the trade secret list 1, such as color inspection method usingCCM, mixing method using Henm mixing equipment, distribution method of salt rates using automatic windings, and removal method of scrap dust using ice kikis, but the above quality control equipment (which only the applicant does not seem to have been used as CCM, mixing equipment, scambing body, self-defense, etc.) does not generally disclose how each quality control process is conducted by using any means other than normal methods known through product manufacturing, etc.

③ The respondent argues to the effect that the applicant does not produce salt in China, but imports salt per se and sells it as a single package after converting it into packaging, or sells it as a single unit until a color desired to have it, and that the applicant does not possess any high-level salt production technology. The respondent also acknowledges the fact that part of the attached Table 1 functional salt or marbin bags listed in the list of plastic solvents is imported from China (as a result, according to the Certificate No. 38, the applicant takes about 15 per cent of the imported salt in Korea in 2008) and sells it as it is without any process, such as mixing it with other salt.

④ The Claimant also limited to the instant business information to an abstract level, such as the source of raw material purchase, type, price, quantity, and customer trend. However, the fact that the Claimant imports salt products itself, not a raw material for the manufacture of salt rates, in a considerable quantity of China, is as seen earlier. Furthermore, the Claimant’s business information is not generally known and is not subject to a special customer or transaction relationship with which the Claimant accumulated time and expenses, or the customer’s unique information and characteristics that it is difficult for the Claimant to easily understand in the transaction relationship with the Claimant, or the competitor’s inherent raw material purchase place which is not generalized or standardized.

⑤ Although the Claimant asserts that the instant information is kept in the database form, such as numerical data and work manuals, the Claimant did not submit any supporting material that can recognize the existence of the database, including the document title or file name of the data or manuals containing trade secrets in the database on the ground that it is trade secrets. As a result, whether the Respondent acquired, stored, and used the trade secret in any way does not specify.

6) In the instant case where the respondent is arguing not only the trade secret of the instant information but also its existence, it is insufficient to deem that the holder of the instant information could obtain a competitive benefit from the competitor through the use of the said information, or that considerable expenses or effort was needed for the acquisition or development of said information, and that the instant information was the minimum specified to determine whether it was publicly known information.

2) Infringement of trade secrets

There is no sufficient proof that the respondent used or disclosed the instant information.

Article 2 Subparag. 3 (d) of the Act provides for “the act of a person obligated to keep trade secrets confidential due to contractual relations, etc., who uses or discloses the trade secrets for the purpose of obtaining improper profits or causing damage to the owner of the trade secrets” as one of the act of infringement of trade secrets.

However, in light of the following facts acknowledged by the record, there is no sufficient evidence to acknowledge that the respondent used or disclosed the instant information after acquiring it.

(1) As asserted by the applicant, there is no sufficient evidence to recognize that Solus are “production or manufacture” even some of the specific salt products listed in the separate sheet No. 1 functional salt or marbioscin bags as claimed by the applicant.

② The respondent asserts that the products that are produced and sold by Sololus are not per se salt charges listed in the list of functional salt or marc bags, but are manufactured by using salt rates imported from China (products made of plastic raw materials to be colored in order to ensure the distribution of salt rates and high density salt rates in advance and well-known so that they are mixed with salt rates) and that the salt rates sold by Sololus are once again sold the salt rates imported from China as they are. Some supporting materials (Evidence No. 35, No. 1, 2, No. 36, No. 37, No. 57, No. 57, No. 59) are consistent with this.

(3) If the applicant imports salt from China, sells it as a good in his/her own name after undergoing a quality control process, and the respondent imports salt from China as a finished product and sells it as it is, as alleged, it is difficult to view that the respondent uses or discloses the applicant’s trade secret even if the name of the product is identical.

④ As seen earlier, it is difficult for the Respondent to specify the applicant regarding the storage form of the instant information or the specific method of acquiring the instant information. In the investigation procedure conducted upon the applicant’s complaint, the Suwon District Prosecutors’ Office conducted search and seizure of Solus on or around February 24, 2010, but was kept on the computer, the documents containing the content of the instant information, except for the file of the applicant’s “sales slip” prepared around 2008, with regard to the agent’s employee who was kept on the computer, was not found. The Respondent failed to submit additional data from the applicant’s side. Ultimately, on March 5, 2010, the Respondent was subject to a disposition that was all suspected of business secrets, etc., occupational breach of trust, theft, etc.

D. Whether the act constitutes an unfair competitive act

○ The respondent cannot be deemed to have committed an unfair competitive act under Article 2 subparag. 1 (i) of the Act.

Article 2 subparag. 1 (i) of the Act provides that “The act of transferring, lending, displaying, importing or exporting goods which imitate the type of goods produced by another person (referring to the form, pattern, color, or luminous or any combination thereof, including the form in a prototype or a letter of product presentation)” is an act of unfair competition.

According to the records (Evidence No. 34-1 to 4, No. 35, No. 22-24, No. 34, No. 35, No. 34) of the product of this case, the applicant company requested the development of the product of this case to be manufactured and sold by entrusting the manufacture of the product of this case to the Respondent Co., Ltd. at the time when the respondent is employed, and the product of this case was not commercialized and sold by the product of this case, and the method of converting salt into an over-divided form is made public prior to 30 years prior to the patent application, etc., and it can be recognized

If so, even if the respondent sold a non-permanent product similar to the type of the product of this case, it constitutes “an act of transferring franchising goods that ordinarily have the same type of goods as those produced by another person” under the proviso of Article 2 subparag. 1(i) of the Act, which is the case excluded from unfair competition (underline, an additional entry is made for convenience). This part of the claimant’s assertion is without merit.

E. Whether the non-competitive entity continues to exist

○ Respondent 1 and 2's obligation to prohibit competitive business has already been recognized, but the appropriate period of prohibition of competitive business has already expired.

1) The validity of the non-commercial agreement: effective.

Even if there exists a competitive prohibition agreement between an employer and an employee, if such agreement excessively limits the freedom of occupation and the right to work, etc. of an employee guaranteed under the Constitution or excessively limits free competition, it shall be deemed null and void as a juristic act contrary to good morals and other social order as stipulated under Article 103 of the Civil Act. Determination on the validity of such an agreement on prohibition of competition shall be made by comprehensively taking into account the interests of the employer who is worth protecting the employer, the status of the employee before his/her retirement, the period, area and type of occupation subject to the restriction on competition, the existence of remuneration for the employee, the reason why the employee retires, the public interest, and other circumstances. Here, “the benefit of the employer at value to be protected” refers to not only the “trade secret” as stipulated under subparagraph 2 of Article 2 of the Unfair Competition Prevention and Trade Secret Protection Act, but also the knowledge or information that the employer has owned, but also does not disclose it to a third party, or it constitutes a contract to maintain customer relations or business credit (see Supreme Court Decision 209Da82444, Mar. 1110).

Comprehensively taking account of the following circumstances revealed by the record, each of the written pledges of this case cannot be deemed null and void as it goes against good morals and other social order. Thus, the respondent 1 and 2 are judged to bear a valid obligation to prohibit competitive business against the applicant.

① Each written oath of this case prohibits leakage of tangible and intangible materials, information, and technology regarding production, production process, quality control, sales, and business matters, etc., and does not transfer to the same industry or establish a same company, and clearly states an agreement that does not provide technical support to others, and it does not seem that each written pledge of this case was made against the intent of the respondent, or that the respondent did not know of its content.

② The above technologies, data, information, etc. appears to be the applicant’s inherent interest worth sufficiently protecting under the agreement prohibiting competition even if they do not reach trade secrets.

③ The Claimant provided the Respondent with the shares of the applicant company equivalent to KRW 10 million in return for the imposition of the duty to prohibit the above competition.

④ The above respondent was employed by the applicant company and went back after establishing Solus, which is the same kind of company, and two years after being employed by the applicant company. In light of the above respondent's career, it is not always possible to work only in Solus, but it is also possible to transfer the applicant company to another company or establish the company.

(ii) Period of prohibition of competition: passage;

Since an employee’s agreement prohibiting competitive business limits the freedom of occupation and the rights of workers, even in cases where an employee sets a period of prohibition of competitive business under an agreement with the employer, if the period of prohibition of competitive business agreed upon in consideration of all the circumstances, such as the employer’s interest worthy of protection, worker’s pre-retirement status, retirement status, position, and eligibility for provision of workers, is deemed to be excessive long-term, the period of prohibition of competitive business may be limited to an appropriate scope (Supreme Court Order 2006Ma1303 Decided March 29, 2007).

In light of the following circumstances revealed by the records, i.e., (i) the instant information claimed by the applicant as trade secrets, or there is no sufficient data to recognize that the respondent acquired the instant information and used it for the Soras business; (ii) the Respondent’s shares equivalent to KRW 10 million paid to the non-commercial agreements, etc. are not considerable amount for the imposition of the non-commercial period of five years; (iii) the Soras’ products are of the same kind of business as the applicant, but there is no sufficient data to deem that the Soras’ products are directly competitive with the applicant’s products; (iv) the respondent is the head of the Technical Research Institute, the respondent 1 is the head of the Technical Research Institute, the respondent 2 is different from the respondent, and the business information related to the Respondent 1 is also different from the technical information related to the Respondent 2 related to the Respondent 1, and there is a considerable difference in the period and expenses for obtaining it for a long time.

Therefore, in full view of the above circumstances, it is reasonable to limit the respondent 1 to 3 years after his retirement and to Respondent 2 years after her retirement respectively.

If so, the respondent 1 is up to January 18, 201, and the respondent 2 bears the duty of prohibition of competition with each applicant until October 31, 2010, and it is clear that the period of prohibition of competition has already expired.

3. Conclusion

The application for provisional disposition against the respondent of the applicant cannot be recognized as the right to be preserved, and all of the applications should be dismissed without any reason. The decision of the court of first instance is unfair with the conclusion different from this, so the decision of the court of first instance is revoked, and the decision of provisional disposition of this case is revoked, and all of the applications for provisional disposition against the respondent of the changed in exchange in the trial is dismissed

[Attachment]

Judges Noh Tae (Presiding Judge) Jin Tae (Presiding Judge)