Samsung tech employees banned from joining SK Hynix for 18 months

A South Korean court has granted an injunction prohibiting two former Samsung Electronics technology employees from joining competitor SK Hynix for 18 months, citing the need to protect national core technology. The Suwon District Court's Civil Division 13 accepted Samsung Electronics' request for a preliminary injunction against the former employees, identified as 'A' and 'B'.

The court ruled that the employees must not be employed by or provide any labor services, including consulting, to Hynix or its affiliates until April 30, 2027, which is 18 months after their departure from Samsung. The ruling also includes a daily penalty of 5 million won (approximately $3,600) to be paid to Samsung Electronics if the non-compete obligation is violated.

The two individuals, who held mid-level management positions and worked for 10-11 years in Samsung's memory division, were reportedly involved in the core design of NAND flash memory, a non-volatile memory technology. Samsung Electronics filed for the injunction based on an agreement signed by the employees upon their hiring, which stipulated a two-year ban on working for competitors after resignation.

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This technology corresponds to national core technology or national cutting-edge strategic technology, and thus has greater value for protection. If exposed to a competing company, the competing company can shorten the period required to achieve the same level of technology, but it can only lead to corresponding competitive losses for the applicant (Samsung Electronics).

The court acknowledged that NAND flash memory design constitutes a "national core technology" or "national cutting-edge strategic technology," thus holding significant value for protection. The judges stated that disclosure to a competitor could shorten the time needed to achieve equivalent technology levels, leading to substantial competitive losses for Samsung. They also emphasized the need to establish fair market order in the highly competitive semiconductor industry.

While the court recognized that the non-compete agreement partially restricts the employees' freedom of occupation, it determined that this restriction alone does not invalidate the agreement. However, the court reduced Samsung's requested two-year ban to 18 months, deeming the longer period potentially excessive and an overreach on the employees' right to choose their profession.

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In a situation where competition in the semiconductor field is fierce, there is a need to establish a fair market economy order. Although the non-compete agreement has the aspect of partially restricting the freedom of occupation, it cannot be seen as invalid solely on that ground.