A Startup Claims, “Lotte Stole Our Technology to Release a Product.” Government Searching for Evidence

The Lotte Dispenser / The AlgoCare Dispenser / Yonhap News

The Ministry of SMEs and Startups is looking into a controversial case over stolen technology and ideas, involving Lotte Healthcare, an affiliate of the Lotte Group, and the startup, AlgoCare.

On January 19, the SMEs ministry announced, “If the company that suffered damages requests an administrative inquiry into patent infringements and mediation for technology disputes, we plan to facilitate a swift arbitration and provide litigation costs if the mediation fails.”

The ministry also said, “In response to the theft of a company’s ideas, we will use digital forensics to secure evidence, and our legal support team will help the startup determine any legal violations concerning the protection of technology developed by SMEs and fill out the report.” If the company requests support, the ministry will provide legal advice on filing reports for related ministries and departments, such as the Fair Trade Commission and the Korean Intellectual Property Office.

According to AlgoCare, a healthcare startup, Lotte Healthcare met with AlgoCare in September 2021 claiming they wanted to introduce and invest in a dispenser for dietary supplements that supplied a set dose of supplements using cartridges, which AlgoCare was developing. Later, Lotte Healthcare released Cazzle, a dietary supplement dispenser, at the CES 2023, the world’s largest showcase of home appliances and IT, in Las Vegas early this year.

However, AlgoCare argued that Lotte Healthcare obtained and stole information on the business strategy of the dispenser in their meeting in 2021, claiming that Cazzle had similar features with AlgoCare’s product, such as the cartridge structure and how it worked, and the dispenser concept.

AlgoCare said it first found out about Cazzle after some visitors mentioned the similarity between Lotte Healthcare’s Cazzle and their product at the CES 2023 and announced that the company was taking legal action after concluding that this was a violation of the Fair Trade Act and the Unfair Competition Prevention and Trade Secret Protection Act.

Lotte Healthcare denied the accusation saying, “It is not at all true.” The company stressed, “Lotte Healthcare already had the idea of selling dietary supplements in small doses based on a customized healthcare platform when we began examining new businesses.”

They argued that models using dispensers to recommend dietary supplements customized to the individual were common overseas.

AlgoCare was established as a healthcare startup in November 2019. The company received the innovation award at the CES and planned to release the product this March.

The SMEs ministry said, “We dispatched a public official exclusively for the administrative inquiry into patent infringements and a lawyer, an expert at the Korea Foundation for Cooperation of Large & Small Business, Rural Affairs, to check the damage suffered by the startup and to discuss measures as soon as we were aware of the case.”