Ceragem Fined 432 Million Won for Transferring SME Mold Blueprints to Chinese Subsidiary

Unfair Special Clauses Violate Subcontracting Act
Design Fee Payments Alone Do Not Justify Ownership

Ceragem Co., Ltd., a well-known healthcare and medical device manufacturer, was found by the Korea Fair Trade Commission (KFTC) to have unilaterally taken ownership of key technical documents—namely, mold blueprints—from small partner companies and to have provided them without authorization to its local entity in China.

Perspective view of Ceragem Gwacheon new headquarters. The Asia Business Daily database.

On August 6, the KFTC announced that Ceragem's violations of the "Act on the Fair Subcontracting Transactions," including unfair special agreements and misappropriation of technology, would result in a corrective order and a fine of 432 million won.

According to the investigation, from August 2019 to January 2024, Ceragem signed 17 mold production outsourcing contracts with 12 subcontractors, inserting unfair clauses that assigned the intellectual property rights related to mold production to itself. Subsequently, Ceragem demanded and obtained 33 mold blueprints from three subcontractors for use by its local Chinese subsidiary, Tianjin Ceragem Medical Equipment Co., and then provided seven of these blueprints to the Chinese entity without any agreement from the partners. The KFTC also found that Ceragem requested motor component specifications and external drawings without issuing the required "technical data request form."

During the hearing, Ceragem argued, "The contract clearly specifies that intellectual property rights belong to our company, and since we paid design fees, the ownership of the drawings lies with us." Ceragem further claimed that since the technology of the main contractor was incorporated, these materials could not be considered the exclusive technical data of the subcontractors.

However, the KFTC did not accept Ceragem's arguments. The commission determined that there was no separate and specific contract for the transfer of ownership, and that the design fee listed on estimates was merely a detailed item within the overall mold production cost, not a legitimate payment for a transfer of ownership. The KFTC clarified that, even if the production method of the main contractor was partially reflected, if the subcontractor’s unique technology and know-how were also included, it still constitutes "technical data" protected under the subcontracting law.

The KFTC stated, "This measure reaffirms that clauses in subcontracting agreements which unilaterally assign the rights to technical data of subcontractors to the main contractors are considered unfair special provisions and are violations of the subcontracting law. The significance of this case is that it clearly establishes that, in the absence of a mutually agreed and concrete contract, merely establishing an unfair clause or paying simple design fees cannot unilaterally restrict a subcontractor’s rights to technical data."

This content was produced with the assistance of AI translation services.