※ Advisory responses to trade secrets (sample)

If a manager who has served in our sales department for ten years moves to a rival company, how should the company handle this issue if there is potential damage?
At the time of employment, the employee signed a contract in which he agreed that he would not move to a rival company. The contract also stated that if he violated this agreement he would be responsible for any civil and criminal claims. Is this part of the contract effective?


I. Legal Review
1. The law that protects trade secrets

PREVENTION OF UNFAIR COMPETITION AND TRADE SECRETS PROTECTION ACT Article 2 (Definitions) For the purpose of this Act, the definitions of terms shall be as follows:
2. The term, 'trade secret,' means any technical or operational information useful for production and sales methods and other business activities, which is not known to the public, has an independent economic value, and considerable effort has been made to keep it secret;
3. The term, 'act of infringing on trade secrets', means any of the following acts:
(d) An act that a person who is obliged to keep any trade secret undisclosed owing to any contractual duty or otherwise uses or discloses to the public with the intention of obtaining unfair profit or inflicting damage on the person holding it;
(e)An act of obtaining any trade secret while knowing the fact that it will be disclosed to the public in such manner as provided in item (d) above or the fact that disclosure will be involved, or without knowing such fact for reasons of gross negligence, or an act of using a trade secret so obtained or disclosing it to the public; and
(f) An act of using any trade secret or disclosing it to the public while knowing the fact that it is disclosed to the public in such manner as provided in item (d) or the fact that disclosure was involved after obtaining it, or without knowing such fact for reasons of gross negligence;
CHAPTER Ⅲ PROTECTION OF TRADE SECRETS
Article 10 (Claim for Prohibition Against Actions Infringing on Trade Secrets) (1) If any business profit is or might be infringed on by any act infringing on trade secrets, the person who holds said secret may file a claim before the court for prohibition or prevention of said act against the person who infringed or intends to infringe on the trade secret.
Article 11 (Liability for Damage Caused by Infringement on Trade Secrets) Any person who has inflicted damage on a person holding a trade secret by infringing on any business profit through an act intentionally or negligently infringing on such trade secret, shall be liable to compensate such damage.
Article 18 (Penal Provisions) (2) Any person who has acquired and used useful trade secrets of any enterprise for the purpose of making an illegal profit or causing damage to the enterprise or who has leaked trade secrets to a third party shall be punished by imprisonment with labor for not more than 5 years or a fine equivalent to the amount ranging from not less than 2 times to not more than 10 times the amount of the profit in property.


2. Relevant laws to protect employees

CONSTITUTION OF THE REPUBLIC OF KOREA
Article 15 All citizens shall enjoy the freedom to serve in an occupation of their choosing.
LABOR STANDARDS ACT
Article 6 (Prohibition of Forced Labor) An employer shall not force a worker to work against his own free will through the use of violence, intimidation, confinement, or any other means by which mental or physical freedom of workers might be unduly restricted.
Article 39 (Prohibition of Interference with Employment) No person shall prepare or use secret signs or lists, or have communications for the purpose of interfering with employment of a worker.

3. Opinion after reviewing two different laws
Employees have a basic freedom to choose their occupation. This means that employees can be free to move to other companies. However, if the employee pursued his own interests by taking advantage of one or more trade secrets obtained while working for a previous company and there is substantial and verifiable evidence that he/she damaged or is expected to damage the previous company, then that company can make legal claims due to the violation of the TRADE SECRETS PROTECTION ACT.

Ⅱ. Fact-Based Understanding
1. Employment contracts concerned

Employment contract signed in Aug 18, 1997.
7. The employee shall not get a job with rival companies like ○○○, ○○○, ○○○, ○○○, and ○○○., nor will he/she get a job with directly or indirectly related competitors. If this principle is violated, I am willing to accept civil and criminal liability.
Retirement agreement signed on July 20, 2007
11. Protection of confidentiality: The employee shall not transfer, use, or preserve the company's secret information and/or trade secrets obtained during his employment or related to his job, to other people or companies without prior written consent.

2. Review of the labor contracts signed with the company
The employee worked in the sales department for ten years before he moved to the sales department of a rival company. There is much concern about damages your company may suffer in sales if the employee is taking advantage of his knowledge of company trade secret(s) for the rival company. Your company sought to address the possibility of such damage in advance by including preventative clauses in the labor contract that the employee signed. Because the contents of the labor contract may infringe on the freedom to choose occupation, their effectiveness is doubtful. However, if the employee moves to a rival company and gives that company tangible, objective, and verifiable trade secrets that damage your company, the labor contracts concerned will provide an important reference in applying for damage claims.

Ⅲ. Opinion after reviewing the case
1. Conflicts concerning legal interests
Since employees are free to choose their own occupation, their decision to move to a rival company is a matter of their own choosing. Accordingly, the company shall not prevent them from quitting their jobs or being recruited by other companies.
However, if an employee damages his/her previous company greatly by taking advantage of a knowledge of trade secret(s) obtained from the previous company, the employee shall make compensation for the damages. The idea of compensation was mentioned and accepted in the agreements that were made between the employee and the previous company and the employer can be protected by relevant law.
2. Suggestion to the company
It is recommended that the company send content-certified mail to the employee and take preventative measures in advance. Doing this is better than waiting for the rival company to take advantage of trade secret(s) that were obtained from the employee who once worked for you.
- Attachment: Content-certified document

Request for Observance of Agreement to Keep Trade Secrets
󰋯Receiver:
󰋯Sender:
We are very disappointed that you have moved to a rival company and that you are in a position where you may possibly damage our company by using trade secrets you learned here. The reason we are writing this letter to you is to prevent any possible claims against you for damage to our company.
At the beginning of your employment in August 1997, you signed an employment contract that contained an agreement that you would not move to a rival company. Also, on July 20, 2007, before leaving our company, you signed a contract detailing your obligation to maintain the secrecy of confidential company information and trade secrets.
We trust you will not use trade secrets from our company, as this will be a severe violation of your previously signed contracts and also of the la