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Korean Gov't Levies Fines on Doosan Infracore for Stealing Technology from SMEs
Crackdown on SME Technology Theft
Korean Gov't Levies Fines on Doosan Infracore for Stealing Technology from SMEs
  • By Jung Min-hee
  • July 24, 2018, 14:04
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An excavator from Doosan Infracore
An excavator from Doosan Infracore

Doosan Infracore was slapped with hundreds of millions of won in fines for providing the technology of small and medium-sized enterprises (SMEs) to other companies for the purpose of lowering the delivery prices of their products.

Doosan Infracore was the first company to be punished after Kim Sang-Jo, chairman of the Fair Trade Commission (FTC), declared that he would sternly punish large companies that steal technology from SMEs.

The FTC announced on July 23 that it levied a penalty of 379 million won on Doosan Infracore on suspicion of violating the subcontract law, and reported its five employees along with the corporation to the prosecutors.

Doosan Infracore is Korea's leading construction machinery maker whose sales last year amounted to 2.6 trillion won.

According to the FTC, Doosan Infracore asked Ino Corporation, a supplier of air compressors, to lower the delivery price by 18% at the end of 2015, only to be rejected.

Doosan Infracore was accused of handing over a total of 31 Ino drawings containing details on welding key parts, painting, and locations where the parts are combined to a third party over five times from March 2016 to July 2017 to help it develop an air compressor.

When the third company started to supply air compressors to Doosan Infracore, Ino Corporation was completely excluded from Doosan’s list of suppliers in August last year. The FTC explained that this lowered the delivery price by up to 10% depending on the model.

Doosan Infracore had Ino drawings because it received technical data from 30 subcontractors in 2015-2017.

A company can ask for technical data only when there is a justifiable reason. However, the subcontracting law stipulates that such requests be made in writing, with the following seven items specified -- the purpose of request, method of maintaining confidentiality, date of requesting, date of providing data, method of providing data, cost, and justification of request.

Doosan Infracore never handed in a written request and gained 382 drawings from its subcontractors.

Doosan Infracore is also suspected of appropriating technical data from another subcontractor, Cosmo Eng.

Cosmo Eng, a supplier of cooling water storage tanks, asked Doosan Infracore to raise its delivery price in July last year and Doosan rejected.

Then Doosan offered a total of 38 drawings of the company’s cooling water storage tanks to five other companies over four months.

These five companies eventually did not sign a contract as they did not meet the conditions and Cosmo Eng is currently supplying storage tanks at the requested higher price.

Doosan Infracore insisted that it received the consent of Cosmo Eng to provide drawings to a third party. On the other hand, the FTC decided that transferring data itself is against the law as it is appropriation of data for illegal uses.

The FTC said that the subcontractors submitted technical data and could not even ask for confidentiality, let alone marking confidentiality, for fears of upsetting Doosan Infracore. The FTC added that the companies were even unable to comply with FTC's request to attend a hearing to state their damages. This is the subcontractors’ position, it explained.

The FTC announced the measures to eradicate technology theft in September last year, conducted investigations into major businesses including machinery and electronics firms, and found the illegal practice in Doosan Infracore.

An official of Doosan Infracore said, "It is our practice and there was negligence in management, but it was definitely wrong. We will introduce stricter standards and will not repeat the same thing again.”