Supreme Court raises criminal stakes in Samsung chip tech leak

Rules that each act of trade secret theft, transfer and use constitutes separate crime

A CXMT DRAM memory module is shown installed on a computer motherboard. CXMT, or ChangXin Memory Technologies, is a Chinese memory chipmaker focused on DRAM production. (CXMT)

Each step in a coordinated technology theft scheme should be prosecuted as a separate crime in South Korea, the Supreme Court ruled last month, significantly widening criminal exposure in a case involving Samsung Electronics’ semiconductor technology allegedly leaked to China.

The court said stealing trade secrets, passing them to an accomplice and using them are not one continuous offense but distinct criminal acts. That conclusion overturns lower court rulings that had treated the entire chain as a single crime of “use.”

The case involves former Samsung Electronics and supplier employees accused of taking proprietary semiconductor equipment designs and process data, uploading them to a shared server and using them for chip development in China.

Lower courts had found the defendants guilty of using trade secrets overseas after the files were uploaded to a network-attached storage server. However, they acquitted them of additional charges tied to acquiring and sharing the same secrets among themselves. Judges reasoned that exchanging the files within the group was merely part of the eventual use and did not constitute separate wrongdoing.

The Supreme Court rejected that logic.

If one person obtains confidential design drawings and hands them to a colleague who did not previously know the information, that handoff itself amounts to unlawful disclosure, the court said. The colleague’s receipt of the material constitutes unlawful acquisition. Both are separate from the later act of putting the technology to work.

The ruling is grounded in Article 18 of the Unfair Competition Prevention and Trade Secret Protection Act, which lists acquisition, use and disclosure as independent offenses.

The Supreme Court vacated parts of the appellate ruling and sent the case back to the Seoul High Court for further proceedings.

One key defendant, a former Samsung manager surnamed Kim, had been sentenced on appeal to six years in prison and fined 200 million won ($138,400). Two former employees of Eugene Technology, a semiconductor equipment supplier to Samsung, received prison terms of up to two years and six months. Those sentences will now be reconsidered.

Prosecutors have also accused Kim of illegally obtaining Samsung’s 18-nanometer DRAM process technology, which the government classifies as critical to national economic security and restricts from being transferred overseas.

The case is part of a broader investigation into the alleged transfer of Samsung technology to ChangXin Memory Technologies, a Chinese DRAM chipmaker.

By making clear that each link in a trade secret chain can stand on its own, the ruling is expected to allow prosecutors to bring multiple charges against members of coordinated technology theft rings.