Leakage of High Technology Threatens Korea’s Competitiveness

Former employees of Korean companies who attempted to sell core technologies worth millions and billions of won to rival countries such as China and Taiwan were indicted by prosecutors. The prosecutors decided to summon an executive of a Taiwanese company who tried to scout them.

The Seoul Central District Prosecutors’ Office (chief prosecutor: Lee Deuk-hong) arrested two former workers of Korea’s leading liquid crystal displays (LCD) manufacturing company, identified as Yoo, 36, and Kim, 32, on charges of violating the Trademark and Unfair Competition Law on Dec. 5. They tried to steal sixth generation thin film transistor-liquid crystal displays (TFT-LCD) manufacturing technology in return for jobs at a Taiwanese company.

Their colleague, identified as another Kim, 34, was indicted without detention.

A person who made this proposal to them, identified as Cha, 44, was arrested, and the prosecutors notified an executive, identified as Zhou, at the Taiwanese company, who came to Korea to negotiate with them, to report to the prosecutors’ office as a suspect.

Also, the prosecutors arrested a former worker of a Korean pharmaceutical company, Kim, 46, for selling the technology to produce intermediates for antibiotics to China via

e-mail, and indicted another, identified as Lee, 47, without detention.

▽ Offer of Several Hundred Million in Annual Salary, Car and House

“We decided to build a six generation LCD manufacturing company in Tainan, Taiwan. We are looking for five or six LCD experts from engineers to the plant manager level. The annual salary will be about 200 million won per person.”

This is what the Taiwanese LCD manufacturing company asked Cha, the CEO of a Korean venture company in which the Taiwanese firm had invested 30 billion won in June.

Cha, unable to refuse a request from his stockholder, said this to Yoo, with whom Cha had worked before establishing his own firm.

Yoo responded, “I don’t know anyone capable for the plant manager position, but I can do the CEO.” In August, Yoo visited the headquarters of the Taiwanese company and negotiated the contract terms. Guaranteed 200 million in annual salary, a house and a car, Yoo recruited two researchers at his workplace, who decided to join him.

Kim logged onto a server shared within the company that would leave no records of stealing technology in August, and copied confidential fourth, fifth and sixth generation LCD manufacturing techniques to an exterior hard disk.

They planned to leave Korea in early November, so they quit their jobs in September, and took English conversation courses together at a private English institute through October in preparation for a new life in Taiwan. However, they were caught just before their departure. The prosecutors confiscated all the records that they had secretly stolen, and it is reported that the technology leakage had not taken place.

▽ Continued Leakage of Technology

It is revealed that technology for producing intermediates for antibiotics that belonged to Korean pharmaceutical firm, an affiliate of the TFT-LCD company, has already been leaked to a Chinese company.

According to the prosecutors, the arrestee identified as Kim, a former worker at a Korean pharmaceutical firm, sold the technology for producing intermediates for antibiotics from January to July 2004 through 20 e-mails to a Chinese company. Kim received $40,000 in return.

Kim even established a company under his wife’s name in May, and imported the intermediates worth 300 million won from that very Chinese company and sold them back to Korea through August.

As a result of the technology leakage, cheaper intermediates for antibiotics are entering Korea from China, and the loss for the Korean company is estimated at $2.5 million for sales abroad, and several billion won for domestic sales, said the prosecutors.

As many as 3,000 patent technologies, such as core technology of code division multiple access (CDMA), are being leaked through the mergers of foreign and domestic companies in recent years, but due to a lax legal system in the related fields, it is hard to prevent technology leakage.

Jin-Young Hwang buddy@donga.com