Case Studies
[Contract Lawyer] The key to fair corporate transactions, Legal review of parent-subsidiary supply entrustment contract by Law firm Veat.
Law firm Veat received a request from the parent company (hereinafter "Customer") responsible for software development and supply, and thoroughly reviewed the legal risks of a supply entrustment contract where a subsidiary entrusts the parent company with supply work. In particular, we comprehensively reviewed issues such as △ the applicability of the “Act on Fair Trade in Subcontracting” (hereinafter “Subcontracting Act”), △ the possibility of violating the “Act on Fair Competition and Consumer Protection” (hereinafter “Fair Competition Act”) due to the addition of unnecessary transaction steps, and △ legal issues arising from payment date deferral, and provided the Customer with legal response measures. 1. Review of Applicability of the Subcontracting Act Whether a supply entrustment contract falls under the Subcontracting Act requires an understanding of the transaction structure and the nature of the supplied goods. (1) Whether the Supplied Goods are for a Specific Purpose The Subcontracting Act applies legal regulations in cases of manufacturing entrustment. If the entrusted goods are designed for a specific purpose only and cannot be used universally, there is a high possibility that they constitute "manufacturing entrustment" under the Subcontracting Act. Accordingly, Law firm Veat thoroughly reviewed whether the goods are versatile or manufactured for a specific purpose. (2) Review of Applicability of the Subcontracting Act Even if it is deemed a manufacturing entrustment, separate review is necessary to determine whether the Subcontracting Act applies, given that the transaction parties are the parent company (ordering party) and the subsidiary (subcontractor). Generally, the Subcontracting Act regulates cases where a large enterprise entrusts manufacturing, services, etc., to a small enterprise, but it may also apply to transactions between group affiliates. Accordingly, we thoroughly informed the Customer about the possibility that the contract would be subject to the Subcontracting Act. 2. Review of the possibility of ‘Unreasonable Addition of Transaction Steps’ under the Fair Competition Act The Fair Competition Act prohibits acts that add unnecessary transaction steps and cause economic disadvantages. In this case, there was a structural problem that the Customer would bear additional distribution costs by passing through the parent company rather than the subsidiary purchasing directly. (1) Legal Analysis of the Parent Company’s Role If the parent company merely acts as an intermediary for the delivery of goods and does not create additional value, there is a high possibility that it will be interpreted as “Unreasonable Addition of Transaction Steps.” That is, if the parent company purchases goods from the subsidiary and resells them without any role, it may be considered an act of passing through unnecessary distribution steps. (2) Whether the Subsidiary Suffers Economic Disadvantages In this case, if the subsidiary receives goods through the parent company and can procure them at a cheaper price than purchasing them directly, there is no practical economic disadvantage. However, if additional costs arise by passing through the parent company and the subsidiary bears a higher price, it may be deemed a transaction structure that violates the Fair Competition Act, and we provided the Customer with detailed legal advice. 3. Review of ‘Payment Date Deferral’ under the Fair Competition Act The Fair Competition Act restricts acts that set payment dates unreasonably or delay payments, thereby increasing the economic burden on the transaction counterparty. Law firm Veat did not overlook this and analyzed the legal elements that could be problematic due to payment date deferral. (1) Economic Effects of Payment Date Deferral If the subsidiary can operate funds for a certain period of time by receiving a deferred payment date, it may be interpreted as the subsidiary receiving support from the parent company. (2) Whether the Payment Date Exceeds the Normal Scope If a long deferral period exceeding the legally normal payment date is granted, or even if the payment date is deemed reasonable, but payments are not actually collected within the date, or interest is not paid, it may be interpreted as an "act of supporting through payment date deferral." Accordingly, we informed the Customer whether the payment date proposed by the Customer is at an appropriate level compared to general trade practices and whether there is a possibility of interpreting it as the parent company providing indirect financial support to the subsidiary. In this way, we confirmed that the supply entrustment contract entails various legal risks under the Subcontracting Act and the Fair Competition Act. Effective management of these risks requires continuous legal review and prompt response. Law firm Veat provides regular legal counsel services and membership services for companies seeking to prevent legal risks in advance and receive ongoing legal support. This is a service designed to go beyond simple one-off legal advice and allow customers to receive prompt and professional legal review whenever they need it. In particular, for startups, there is a high probability of facing unexpected legal issues due to rapid growth and changes in business models. Therefore, Law firm Veat provides customized legal subscription services tailored to the characteristics and growth stage of startups, enabling companies to establish a stable legal foundation from the beginning and promote sustainable growth. Through this service, customers can receive regular advice on major legal issues and can respond quickly and effectively in the event of complex legal problems. Corporate lawyer Law firm Veat supports the establishment of a fair transaction structure by providing professional analysis of various legal issues that may arise in corporate transactions and minimizing the legal risks of the customer. If you need legal advice related to supply entrustment and the Subcontracting Act, or regular legal advice, please feel free to contact Law firm Veat. This case study can also be found on the Law firm Veat blog. - Fair Corporate Transactions: Legal Review of Supply Entrustment Contracts between Parent and Subsidiary Companies Thank you. Law firm Veat
[IT Litigation] Legal Response Measures Companies Should Take for Generative AI and IoT Hacking Damage
The advancement of the Internet of Things (IoT) and generative Artificial Intelligence (AI) is bringing about important technological innovations that increase the efficiency of corporate operations and create new business opportunities. However, at the same time, companies must prepare for new IT security threats and legal issues. Especially, if security vulnerabilities in IoT devices and AI systems are exploited, it can lead to serious damages such as leakage of corporate trade secrets, service interruptions, and legal liabilities, so minimizing legal risks through a proactive approach and establishing a stable operating environment is important. Increasing Cybercrime Utilizing IoT and Generative AI According to the latest security trends provided by search portals such as Google, hacking cases utilizing IoT and generative AI are expected to increase. IoT devices are often vulnerable due to their characteristics, and AI-powered automated attacks are becoming more sophisticated. In particular, if a security breach occurs through IoT devices, companies can suffer massive damage such as the paralysis of internal systems or the leakage of trade secrets. Search data also shows an increase in searches related to IoT hacking and AI security threats, which demonstrates an important risk factor that companies must prepare for.
[IT Litigation] Free Font Usage, Copyright Infringement and Liability for Damages
Copyright infringement disputes related to the use of free fonts are increasing. In particular, it is a problem when users commercially use the font despite the terms of use not allowing commercial use of the free font. It is a problem whether the user violated the terms of use and whether the user’s font use constitutes copyright infringement. Free Font Usage and Copyright Issues Many users think that they can use free fonts without any legal problems, but in reality, usage may be restricted according to the font distributor's terms. For example, some free fonts can be used freely for personal use, but a separate license may need to be purchased for commercial use. However, many users do not clearly understand these license conditions and use them for commercial purposes, resulting in disputes. The Supreme Court stated regarding font programs, "A person who has been authorized by the copyright owner to copy a computer program by installing it is using the work within the scope of the authorized use and conditions. If the user who has received permission for copying violates the program’s usage method or conditions stipulated by contract with the copyright owner, it is separate from the fact that the copyright owner's reproduction right has been violated." (Supreme Court 2017. 11. 23. Judgment 2015다 1017, 1024, 1031, 1048) In other words, even if a user violates the terms of use when using a free font, it does not necessarily constitute copyright infringement. However, if the user violates the terms of use, contractual liability for non-performance may arise, and in certain cases, there is a possibility of assuming the obligation to pay damages. Liability for Damages and Legal Considerations One of the key elements in copyright disputes related to the use of free fonts is liability for damages. Generally, the copyright owner, who is the party claiming damages, must prove the fact that damages have occurred and the amount of damages. In this regard, according to the Act on Regulation of Standard Contract Terms, clauses in standard contract terms that are excessively disadvantageous to users may be deemed invalid. Therefore, it is necessary to examine whether the usage terms set by the free font distributor have legal effect. When using a free font, you must always check the font's license. Not all free fonts can be used freely for all purposes, and the usage conditions for non-commercial and commercial use may differ. Therefore, it is important to clearly understand the scope of use before downloading the font. Also, carefully review the terms presented by the font distributor and seek expert advice if there are any unclear parts. Especially for companies, it is necessary to establish a font usage policy internally to prevent employees from inadvertently violating license conditions. These precautionary measures can prevent copyright disputes and reduce legal risks. Law firm Veat provides legal services reflecting the latest trends to help companies prevent legal risks and operate their businesses stably, based on many years of experience and expertise in the IT and copyright legal advisory fields, recognizing the importance of copyright and intellectual property rights in line with the development of digital technology. Thank you. Law firm Veat
Memorandum of Understanding legal review: The first step to building a successful medical information system.
Law firm Veat received a request from an AI specialized enterprise (hereinafter referred to as "client") to review a memorandum of understanding related to the construction of information systems for medical institutions. Law firm Veat’s review of the memorandum of understanding for a successful contract In projects requiring advanced technology, such as the construction of medical information systems, it is essential to clearly define the roles and responsibilities of the companies involved, and it is important to review these in detail in advance to prevent disputes that may arise later. Therefore, Law firm Veat thoroughly reviewed the memorandum of understanding to protect the client’s interests and support the smooth progress of the project. 1. Legal review of the business partnership agreement between companies
[Law firm Veat TIP] Understanding Copyright Property, the core of content contracts
Law firm Veat TIP(Technology Intellectual Property) team content copyright property regarding detailed explanation to startup-specialized media platform Platum contributed. Webtoons, web novels, dramas, etc., as the content industry grows, secondary copyright has emerged as an important issue. In this column, we explained the concept of copyright property and unfair contract clauses confirmed through recent Fair Trade Commission corrective measures, such as secondary copyright and priority negotiation rights. [This link] you can confirm this column. The column published by Law firm Veat TIP team provided useful information to those interested in protecting the rights of creators such as webtoon artists, web novel artists, and content platform business operators. Copyright issues in the content industry are understanding of detailed rights and contract conditions is essential, so it is important for creators to accurately identify how their works can be protected through legal professionals. In particular, copyright property consists of seven rights, and each right can be individually transferred. Also, since even one right among these rights can be subdivided by region, period, usage method, etc., careful review is necessary in the contract conclusion process. Law firm Veat TIP(Technology Intellectual Property) team provides in-depth legal services in the field of copyright property based on accumulated advisory and litigation experience in the content industry such as manga, webtoons, and web novels. While protecting the rights of creators, it analyzes legal issues in the contract conclusion process and provides legal advice on the establishment and use of creation rights so that collaboration with platform businesses can proceed smoothly. If you need copyright property legal advice, please feel free to contact Law firm Veat. Thank you. Law firm Veat
Stock acquisition and shareholder agreements, how should they be written? (Form provided)
Law firm Veat received a request from pet startup A (hereinafter referred to as “the client”) to draft a stock transfer agreement. The pet market has been growing rapidly recently, and related startups are also developing rapidly. However, if legal issues such as stock transfers and shareholder agreements are not clearly resolved during the growth process of a startup, it may experience difficulties in operating the business in the future.
Copyright infringement rights contract violation, service contract review for copyright protection essential checkpoint.
Law firm Veat reviewed the copyright infringement and right contract violation at the request of an AI artificial intelligence company (hereinafter referred to as "customer"). The customer was providing services that create virtual figures using AI technology and combine them in various ways, and entered into a service contract with a specific company (hereinafter referred to as "counterparty") to develop virtual figure images and videos created by AI. However, circumstances were captured in which the counterparty was illegally using the development results without the customer's consent, and the customer requested advice on countermeasures to Law firm Veat specializing in intellectual property. The important legal issue in this case was whether the development results of an AI-based virtual figure constituted a co-authored work and whether copyright infringement would arise if one of the co-authors used the results without the consent of the other. The contract between the customer and the counterparty stipulated that the virtual figure images, videos, and other development results created by the developer would be considered co-authored works by both parties. A co-authored work means a work created jointly by several people whose individual contributions cannot be separated. In the case of such co-authored works, whether copyright infringement has occurred becomes an issue if one co-author uses the work without the consent of the other co-author. “The copyright property rights of a co-authored work cannot be exercised except with the agreement of all copyright property rights holders.” This provision only specifies the method for exercising the copyright property rights of a single co-authored work for which the individual contributions of the co-authors cannot be separated, so even if a co-author uses the co-authored work without the agreement of the other co-author, it only amounts to a violation of the method of exercising the copyright property rights concerning the co-authored work as stipulated in the provision by the co-authors, and does not constitute an infringement of the copyright property rights concerning the co-authored work of another co-author (Supreme Court Decision 2024. 12.11 in Case No. 2012do16066). We comprehensively reviewed the Supreme Court precedent to determine whether criminal responsibility could be imposed on one co-author who used a co-authored work without the consent of the other. In addition, we advised on the possibility of usage restrictions based on specific contractual clauses, even if a co-author used the work without consent. Law firm Veat explained that it would be necessary for the customer to strengthen the service usage contract concluded with the counterparty in order to prevent similar problems from occurring in the future, and recommended preparing a contract that clearly stipulates the scope of use and ownership of the virtual figure development results and strengthens liability for damages in the event of a violation. Law firm Veat provides expert legal advice in the copyright and intellectual property fields and operates a TIP (Technology.Intellectual Property) team. The Veat TIP team specializing in intellectual property provides professional legal services, such as legal advice and litigation response, on copyright and intellectual property-related legal issues and disputes centered on future technologies and ICT new industries such as IT · software, NFT, metaverse, and games. The TIP team that reviewed this case supported the customer's legal problem-solving based on a deep understanding and abundant experience in AI-based service usage contracts and copyright protection. If you have encountered legal issues such as copyright infringement due to unauthorized use of works related to development services such as copyright infringement, we recommend that you consult with copyright attorney Law firm Veat for expert legal advice. The case study of this case can also be confirmed on the Law firm Veat blog below. - Copyright right contract breach, service contract review for copyright protection essential checkpoints Thank you. Law firm Veat
Confidentiality Agreement, Law firm Veat's know-how protecting core assets of technology companies.
Law firm Veat received a request from an advanced technology integration engineering company (hereinafter referred to as the "client") to draft and review Non-Disclosure Agreements (NDAs). The client requested an NDA review as part of the process of entering into a purchase agreement with a buyer, and Law firm Veat, specializing in corporate law, reviewed the agreement to derive the optimal contract terms from the client's perspective and minimize legal risks. Since the client was likely to be in a position to provide confidential information, Law firm Veat reviewed and revised the NDA clauses, prioritizing the client's interests. Law firm Veat’s Non-Disclosure Agreement (NDA) Review 1. Restriction on Use of Confidential Information First, it was clearly stipulated that the recipient of the confidential information (the buyer) could only use it for the purpose of the agreement. Specifically, a clause was included to restrict the use of the information for other purposes unrelated to the agreement or its provision to third parties. 2. Strengthening the Definition and Protection Requirements of Confidential Information Certain requirements must be met for information to be recognized as confidential. To ensure that the information provided by the client received sufficient protection under the NDA, Law firm Veat incorporated obligations to expressly state that the provided information is confidential, and obligations to notify the other party that certain information is subject to protection through prior notification. By including these clauses, the client’s confidential information can be legally protected in the event of a legal dispute. 3. Clarification of Parties’ Obligations and Breach Penalty Clauses If the recipient of confidential information breaches the agreement, the penalty clause must be clear for it to be effective. Therefore, the startup attorney strengthened the breach penalty clause to allow for legal remedies in the event of a breach. This increased the effectiveness of confidential information protection and enabled the client, as the information provider, to more securely protect its technology. Why Non-Disclosure Agreements are Important Companies in the ICT and IIoT (Industrial Internet of Things) sectors, where advanced technology is concentrated, secure a competitive edge in the market based on innovative technology and data. However, such technological advantages must be supported by security. It is particularly important to prevent the core technology and know-how from being leaked during collaboration or contract negotiations with external companies. For companies in technology-intensive industries like ICT and IIoT, confidential information is essentially their core asset, making its protection essential. If technical materials or trade secrets are leaked without an NDA, they may be imitated or misused by competitors, which can lead to a weakening of the company’s market competitiveness. A Non-Disclosure Agreement is a contract that generally governs the legal relationship between the disclosing party (Disclosing Party) and the receiving party (Receiving Party), and generally includes a definition of confidential information, restriction on use of confidential information, confidentiality obligations and exceptions, and penalty clauses in the event of a breach of contract. As can be seen from this case, a Non-Disclosure Agreement is a crucial legal mechanism for protecting a company’s important information. Companies in advanced technology fields should take a more cautious approach when entering into NDAs. Therefore, we recommend that companies have corporate legal experts with extensive experience draft and review contracts to minimize legal risks and operate businesses stably. Law firm Veat: Essential Legal Partner for Growing Startups Law firm Veat provides customized legal subscription services tailored to the characteristics and growth stages of startups. This service supports startups in building a stable legal foundation from the beginning and achieving sustainable growth. You can design the essential legal foundation through consultation with a startup-specialized attorney, and provide customized support by distinguishing between the cases that require regular legal advice based on the company's growth stage and the legal issues that may arise intermittently. This allows startups to receive the legal services they need more efficiently. In addition, various legal materials essential for startup operation are also provided. We provide core contracts that startups can practically use, such as employment contracts, confidentiality agreements, shareholder agreements, subscription agreements for new shares, and stock purchase options, to help strengthen the foundation for growth. Law firm Veat’s legal subscription service is designed to meet the needs of startups at each growth stage and provides high-quality legal advice at a reasonable cost. Law firm Veat will be a reliable partner for startups to grow stably without legal risks. Law firm Veat has served as legal counsel and advisor for over a thousand venture and startup companies, providing specialized legal advice to companies and continuously researching industry trends and legal changes to resolve various legal issues faced by startups. If you need corporate advice, such as confidentiality agreements, those who require regular legal advice like in-house legal counsel, should consider Law firm Veat, which specializes in corporate law, to find the best solution. This case study can also be found on the Law firm Veat blog. - Law firm Veat’s Know-How for Protecting Core Assets of Technology Companies with a Confidentiality Agreement Thank you. Law firm Veat
[Law firm Veat TIP] CHECK the scope of protection explained by a copyright expert.
Law firm Veat’s TIP (Technology Intellectual Property) team, specializing in IT and digital content, has contributed a detailed explanation of the scope of protection of the Integrity Rights to Platum, a media platform specializing in startups.
[Forest of Innovation] Partner Attorney An Il-un, Column Contribution: When Management Consent Rights in Investment Contracts Become Invalid
Law firm Veat partner An Il-woon wrote a column on the invalidity of management consent rights in investment contracts for startups in Innovation Forest. Management Consent Rights and the Principle of Shareholder Equality A management consent right is a right that requires an investor to pre-consent to the company’s major management decisions and is often included in clauses when investors inject funds into startups. However, according to the principle of shareholder equality, all shareholders should have the same rights proportional to the number of shares they hold. Therefore, special rights such as management consent rights can violate the principle of shareholder equality if they are granted only to some shareholders. An Il-woon, partner, thoroughly explained the necessity of shareholder agreements, especially their role and importance in venture companies, through several Supreme Court cases in the Innovation Forest column. You can check the details on how shareholder agreements affect company operations and how to prevent and resolve potential legal issues that may arise through the content below. When is a management consent right in an investment contract invalid?(Innovation Forest) Both startups and investors should carefully review whether management consent rights are set within the legally valid scope when entering into a shareholder agreement. The elements to be considered when drafting an investment contract have become clearer through Supreme Court cases, and it is important to analyze each case carefully and design the optimal contract structure, rather than simply following existing contracts as a matter of course. Startup investors need to consult with legal professionals to clearly understand management consent rights and other contract conditions, and to minimize legal risks. IT specialist lawyer An Il-woon, partner, who participates as an external contributor to the startup growth analysis platform Innovation Forest, has extensive experience in M&A, investment, and intellectual property protection for startups and IT companies and provides various consulting services in domestic and international startup investment transactions. We design optimal investment contract structures that minimize legal risks for startup founders and investors, and also provide active legal advice in areas such as corporate control protection, shareholder agreements, and intellectual property disputes, focusing on establishing a legal foundation for IT and technology-centric companies to grow rapidly. Thank you. Law firm Veat