The Act on Special Measures for Reinforcement and Protection of Competitiveness of National Advanced Strategic Industries (the “Strategic Industry Act” or the “Act”), as promulgated on February 3, 2022 and scheduled to become effective in August of this year, newly defines the “national advanced strategic industry” and “national advanced strategic technology” in aiming to develop and protect the relevant industries. In this article, we will examine the legislative history and key details of the Act.
I. Legislative History and the Purpose of the Enactment
A. Legislative History
As the global competition between countries over securing advanced industrial technologies and achieving the leading position in the market for high-tech, such as semiconductor business, intensifies, the government and members of the political parties have formed a consensus that an extensive support to enhance investment and R&D personnel in the strategic industries has become imperative. Reflecting the consensus, the members of the National Assembly (“Members”) including Byung-cheol Soh, Eui-dong Yoo and Young-gil Song promoted the legislation of a special law and the aforementioned Members subsequently proposed bills for the distinct need. Upon a review by the Patent Sub-committee under the Ministry of Trade, Industry and Energy (the “MOTIE”), on December 1, 2021, the lawmakers decided to integrate the three proposed bills based on the bill proposed by the Member Young-gil Song. On January 11, 2022, an alternative bill proposed by the Patent Sub-committee passed the National Assembly and also the Cabinet meeting after two weeks, on January 25, 2022.
The MOTIE further gathered opinions related to the announced decree until May 2, 2022, and public meetings to discuss and explain how a strategic industry is designated and to explain details of the support and protective measures therefor has taken place during the first half of the year.
B. Purpose of the Enactment
There are two comparable laws enacted and in effect in Korea for the protection of industries, but the Strategic Industry Act aims to protect and support technologies in a different scope and is drafted to achieve an objective distinguished from the existing laws. As an outline of the difference, first of the two laws, the Act on Prevention of Divulgence of Industrial Technology (the “Industry Technology Protection Act”), aims to protect designated (i) industry technologies, such as technology information necessary for development, production or use of products or services, or (ii) national core technologies of high technological and economic values from leaking to abroad to prevent a material adverse effect on national security or economy. The second law, the Foreign Trade Act, is limited to strategic materials, which require export permission incompliance with the international export control system.
The Strategic Industry Act, on the other hand, specifically applies to strategic technologies, which is defined as the technologies with significant effect on national and economic securities (e.g., stabilization of supply network) as well as national exports and employment, which result in extensive ripple effects on relevant industries. In this manner, the scope of technology subject to the Act as well as the purpose and effect thereof are distinguished from the two comparable laws.
II. Key Details of the Strategic Industry Act
A. Key Provisions
The following states the key provisions that are introduced in the Strategic Industry Act:
B. Comparison with the Industry Technology Protection Act
The Strategic Industry Act, in principle, prevails over other laws in terms of the advancement of the strategic industries, and the Act further provides that, unless otherwise prescribed in the Act, the protective measures for the strategic technologies shall be governed by the Industry Technology Protection Act as having a status of a special law in respect of the Industry Technology Protection Act.
The Strategic Industry Act also applies a stronger protective measure and heavier penalties for any violation thereof, compared to the Industry Technology Protection Act. For instance, the Strategic Industry Act prescribes that any technology designated or approved for export as a strategic technology shall be deemed as given the equivalent status of the national core technology with respect to the designation or approval for export. In light of the above, it is expected that the “strategic technology” under the Strategic Industry Act will cover a narrower or more focused scope of the important technology compared to the “national core technology” under the Industry Technology Protection Act and will take precedence over other laws in designating and managing the strategic technology.