News
Legal Requirements to Verify When Subcontracting Arises in Software Development Contracts
Software development projects are inherently difficult for a single company to handle from planning to development, testing, and maintenance. This often leads to a subcontracting structure where the main contractor re-entrusts some of the development work to external development companies. However, failing to thoroughly review relevant laws and regulations during this process can lead to legal risks. The most representative law is the 「Act on Fair Subcontracting (hereinafter referred to as the ‘Subcontracting Act’).” The Subcontracting Act applies not only to manufacturing but also to technical service areas such as software development, and requires the main contractor to fulfill several legal obligations if certain conditions are met. First, according to Article 13 of the Subcontracting Act, a written document containing the main conditions of the subcontracting agreement must be provided. Specifically, this should include the scope of work, delivery schedule, and price calculation criteria. Simple verbal agreements or email notifications will not satisfy the legal requirements. Article 13-4 prohibits special clauses that unfairly restrict or infringe on the interests of the subcontractor, and Article 14 explicitly prohibits setting a subcontract price significantly lower than the normal price. Such actions can lead to corrective measures by the Fair Trade Commission, as well as claims for damages and criminal penalties (fines for representatives, etc.). Meanwhile, software development contracts also include important elements such as intellectual property rights assignment, confidentiality obligations, and liability for delays. These must be designed so that they do not conflict with the obligations under the Subcontracting Act. In particular, the issue of IP assignment for development results can affect future commercialization, further development, and investment attraction, so it is desirable to clarify it at the initial stage of the contract. The software development structure that includes subcontracting agreements requires not only technical completeness but also the completeness of the legal structure, which is a factor that determines the success or failure of the project. Therefore, in practice, it is essential to accurately understand relevant laws and regulations and to draft and manage contracts that reflect them. If you are interested in more detailed information regarding this column, please refer to the official blog below. [IT Litigation] Frequently Occurring Software.. : Naver Blog Thank you. Law firm Veat
Legal Review of the possibility of lawsuits by overseas entities against domestic companies for copyright infringement. Law firm Veat
Law firm Veat conducted a legal review for an IT company ("client") regarding the possibility and targets of civil and criminal lawsuits related to copyright infringement that a foreign subsidiary could bring, including whether domestic entities and employees are included. The Copyright Act treats the works of foreigners differently from the works of Korean nationals, and stipulates that protection is only granted on the premise of fulfilling certain requirements. Law firm Veat provided specific legal advice to the client based on the Copyright Act, laws related to the legal capacity of foreign subsidiaries, and similar cases. Law firm Veat operates an “TIP(Technology·Intellectual Property) team” with outstanding expertise in copyright, IT technology, and intellectual property, and has been providing legal support to the client. Those interested in more detailed information regarding this case study can check the blog below. - [Copyright] Will the works of a foreign subsidiary be protected under the Copyright Act? Thank you. Law firm Veat
[Law firm Veat V.A.R] Global AI Regulatory Sandbox Trends and Implications
In the era of AI, the private sector is tireless in its efforts to enhance AI capabilities and strengthen competitiveness. The government also aims to be an “AI Top 3 Nation” and is committed to developing various visions and policies and securing resources to support them. However, when we look at the reality of our country, we are blocked by “regulatory barriers” from the stage of securing “learning data” needed for AI learning, and even if we develop innovative products and services based on excellent AI capabilities, we must overcome regulatory barriers such as “licenses and permits” again to release them to the market. Korea has been operating a so-called “Korean Regulatory Sandbox” since 2019 to solve the problems of the positive regulatory system, but it has been pointed out that “the current Regulatory Sandbox system alone is limited in supporting AI industry promotion”. Meanwhile, one of the key policies of the “EU AI ACT”, which has greatly influenced Korea’s Artificial Intelligence Basic Law, is that it allows member states to operate AI Regulatory Sandboxes. Major countries and international organizations, including the EU, recognize the benefits of the Regulatory Sandbox and are showing a willingness to actively utilize it in the field of artificial intelligence. This report will examine the current status of “overseas AI Regulatory Sandboxes” and explore what types of special regulations are needed to activate the collection, utilization, and utilization of “learning data”, and whether Korea should introduce an “AI Regulatory Sandbox” or expand and reform the existing ICT Regulatory Sandbox. Law firm Veat, with its experience and know-how in Regulatory Sandbox consulting and advice since 2018 and its expertise in the artificial intelligence industry, will provide professional advice and consulting to companies regarding regulatory improvement and will actively participate in government and National Assembly improvement efforts. If you have any questions regarding AI-related Regulatory Sandbox consultation and application, please contact the “Regulatory Sandbox Consulting Team (Representative Attorney Song Do-young, doyoung.song@veat.kr, 02-576-8990)”. Thank you. Law firm Veat [VEAT Regulatory Sandbox Consulting Team] Regulatory Sandbox Consulting Team Introduction: The ‘VEAT Regulatory Sandbox Consulting Team’ has been conducting government projects and corporate consulting related to Regulatory Sandboxes since the project discovery stage in 2018, for a total of 7 years. VEAT has experience reviewing over 500 cases, the largest number in Korea, through Regulatory Sandboxes for ICT, industrial convergence/financial innovation/smart cities/regional special zones/mobility. Representative Attorney Song Do-young has been awarded the ‘Prime Minister’s Commendation’ for his contribution to the activation of the Regulatory Sandbox system, serves as a member of the Financial Innovation Review Committee, and Law firm Veat has received an institutional commendation from the Ministry of Science and ICT. Members: Representative Attorney Song Do-young, Partner Attorney Baek Seung-cheol, Partner Attorney Jo Eun-byeol, Senior Attorney Jeon Yong-hwan, Senior Attorney Park So-hee, Attorney Song Ji-young, Attorney Kim Ji-soo, Attorney Lee Hye-rim, Attorney Han Hyung-joo, Attorney Lee Han-song, Researcher
E-commerce platform refund responsibility, beyond a simple connector, a legal obligation.
With the rapid growth of e-commerce platforms, issues of delayed refunds and non-refunds after cancellation of contract have emerged as consumer protection concerns. Recently, the Fair Trade Commission has issued corrective orders against A and B e-commerce platforms for violating the Electronic Commerce Act, clearly stating that platforms may not merely be simple intermediaries but can bear legal responsibility as payment management entities. In particular, e-commerce platform A operates a structure where it directly receives payments from consumers and settles them with tenant businesses, and has even filed for bankruptcy proceedings following large-scale refund delays. Consequently, the possibility of consumers recovering their refund amounts has become uncertain, and the Fair Trade Commission has ordered additional measures such as transparent disclosure of refund details. This case demonstrates that when a communication sales intermediary exceeds certain roles, responsibilities equivalent to those of a communication sales operator under laws may arise. Accordingly, e-commerce platforms need to re-examine the appropriateness of cancellation and refund processing systems and strengthen consumer protection systems. Law firm Veat is assisting with e-commerce platform operation service structure analysis, refund process design, terms and conditions revision, Fair Trade Commission and related organization response, and the entire spectrum of e-commerce practical matters. If you require related advice, please feel free to contact Law firm Veat. You can confirm the specific content of this column at [Law firm Veat blog] . Thank you. Law firm Veat dream
Legal consultation regarding the collection of usage records of third-party services by metaverse platform companies.
Law firm Veat received a request from a client operating a metaverse platform and reviewed the matter regarding the method of data usage when providing community services to the client by utilizing a third party's service.
Potassium sulfate fertilizer sales related licenses, permits and lease agreement review.
A customer operating a recycling specialized company wishes to manufacture and sell fertilizer from “potassium sulfate” generated as a by-product during the recycling process, and requested legal consultation from Law firm Veat regarding the necessary licensing procedures and legal requirements related to industrial complex occupancy contracts. Law firm Veat reviewed whether potassium sulfate falls under any type of fertilizer according to the “Fertilizer Management Act,” and provided guidance on the necessary fertilizer manufacturing registration requirements and procedures according to relevant notifications and process standards. In addition, it examined whether the fertilizer manufacturing industry is included in the permitted industries of the general industrial complex where the customer's factory is located, and the contract amendment procedures necessary for business expansion, focusing on legal and practical considerations. Furthermore, we explained practical points to note, such as the possibility of requiring prior consultation with related organizations or submission of additional documents depending on the detailed industry characteristics in some industrial complexes, and the necessity of organizing product usage, composition, and manufacturing methods in advance. This consultation is an example of a comprehensive review of potential licensing and contractual issues that may arise in the process of promoting a new business utilizing potassium sulfate, a special material, and is specialized legal advice for the environment and recycling industries. Law firm Veat has provided legal advice for various renewable energy and recycling projects based on a deep understanding of the environmental and resource circulation industries. In particular, it provides specialized legal services in the ESG and environmental fields, centered around national attorney partner, Kum-soo. Those who are curious about more detailed information regarding this case study can check the official blog. Thank you. Law firm Veat
AI medical solution company's NDA (Non-Disclosure Agreement) Korean/English drafting examples
Law firm Veat received a request from a client developing and operating brain and AI-based medical solutions, and performed drafting of Korean and English Non-Disclosure Agreements (NDAs). The client provides solutions that improve the quality of medical services through AI technology utilizing patient data, and is conducting collaborations with various external organizations, including technology reviews, joint projects, and investment negotiations. Consequently, the need for standard NDAs that can be readily used in practice while safely protecting technology and business information arose. Law firm Veat, in response to the client’s request, designed two versions of the NDA that can be advantageously utilized from the perspective of both the information provider and the recipient. The version for the information provider is structured to maximize the scope of confidential information protection, restrict the purpose of use, and specify strong remedies for violation, including return/destruction of information after contract termination. Conversely, the version for the information recipient clearly limits the scope of confidential information, adjusts for flexible use within the purpose, and rationally designs the scope of liability. Furthermore, considering the client’s global collaboration environment, an English contract was also provided along with it, completing a practical contract tailored to actual usage environments, not merely a translated version. Law firm Veat supports clients in minimizing unnecessary legal risks during collaboration through tailored contract design that reflects the business structure and information protection strategy of technology-based companies. Those who are interested in more detailed information regarding this case study, please refer to the official blog below. Law firm Veat : Naver Blog Thank you. From Law firm Veat
Legality review of searching employees' work PCs
The client, a hospital operator, requested consultation from Law firm Veat regarding whether the act of a company inspecting data stored on a work PC used by a retired employee to check for leakage of trade secrets or important information is lawful according to related laws and regulations, such as the “Personal Information Protection Act.” The client was concerned that inspecting the device, given the possibility that it contains the retired employee’s personal information, might constitute a legal violation. Law firm Veat comprehensively reviewed related laws and regulations, including the “Act on Prevention of Unfair Competition and Protection of Trade Secrets,” along with the “Personal Information Protection Act” and the “Telecommunications Business Act Confidentiality Act,” and analyzed the major requirements that must be met for the device search to be conducted lawfully. Furthermore, considering the client’s organizational structure and the departing employee management system, it presented practically applicable response measures and supported the company in making a balanced judgment between the values of personal information protection and internal information management. Law firm Veat frequently provides consultation on sensitive issues such as trade secret protection, personal information management, and internal information leakage, which platform, IT, and data-driven companies often face, and in practice, provides guidance on the necessity of overall internal system improvement, including establishing internal security policies, designing personal information protection procedures, and establishing post-response protocols. Those who need legal advice regarding trade secret leakage, information security policies, and internal control system construction are welcome to contact Law firm Veat at any time. For more details on this case study, please see Law firm Veat official blog. Thank you. Law firm Veat
Startup-tailored legal service ‘Legal Tune’ officially launches – Platum introduction
Law firm Veat recently announced through the startup-focused media outlet 'Platum' the launch of a new legal service 'Legal Tune' for small and medium-sized enterprises and startups. Legal Tune provides customized legal support to help small and medium-sized enterprises and startups effectively and quickly resolve legal issues they often face in the early stages of business. Specifically, it provides comprehensive legal consulting including the drafting and legal compliance review of key legal forms essential for business operations, such as terms of service, privacy policies, and lease agreements. Law firm Veat, based on its extensive legal advisory experience accumulated in various platforms and IT fields, thoroughly analyzes each company’s unique business model and service characteristics to present optimal legal solutions that meet customer needs. The Legal Tune service is directly handled by experienced lawyers recognized in the data protection and IT law fields, providing high-quality legal advice based on expertise and practical experience. In particular, Law firm Veat has been selected as the leading boutique law firm for two consecutive years in the TMT league table announced by Legal Times, and Song Do-young, representative lawyer, has also been recognized for his expertise in the LEADING LAWYERS 2024 TMT section, establishing himself as a leading law firm in the technology, media, and telecommunications (TMT) field. Jo Eun-byeol, partner lawyer in charge of the Legal Tune service, has been serving as a legal advisor to the Personal Information Protection Committee, providing legal interpretation and policy advice on personal information-related matters, and Baek Seung-cheol, partner lawyer, holds certifications as an ISMS-P and PIPL certification auditor and is actively conducting personal information protection education for public and educational institutions. Jo Eun-byeol, partner lawyer, said, “Many companies are unaware of legal risks and experience unnecessary legal disputes,” and “Legal Tune aims to increase the legal stability of companies by thoroughly analyzing their business models and service characteristics and providing customized legal services.” Law firm Veat plans to continue striving to help small and medium-sized enterprises and startups effectively respond to legal issues. [Legal Tune Service] Thank you.
[202505] Monthly Veat May issue_ Court Perspectives on the “Obligation to Public Offering” Clause in Investment Contracts
An initial public offering (IPO) serves as a critical exit mechanism for investors in venture investments and is therefore a highly sensitive issue for both investors and companies. Accordingly, investment contracts in venture capital transactions commonly include provisions addressing IPO obligations, albeit with varying degrees of specificity. Recently, Korean courts have rendered notable decisions concerning these IPO-related clauses. This newsletter reviews the Seoul Central District Court decision (Case No. 2022Gahap536943), where the alleged breach of an IPO obligation under an investment agreement was at issue. 1. Background of the Case The plaintiff, an investment management company, entered into a common stock investment agreement with the defendant through a fund managed by the plaintiff. The key provisions of the agreement were as follows: Article 8 (Company’s Obligation to Public Offering) To facilitate the investor’s early exit, the company shall proceed with an IPO as follows: The company shall list its shares on the KONEX market by December 31, 2019, and subsequently list on KOSDAQ within two years after the KONEX listing. However, if the company proceeds directly to list on KOSDAQ, the obligation shall be deemed fulfilled. If an acquisition or merger proposal is made by another listed or unlisted company, the company shall consult with the investor and participate in good faith in such discussions. If the company is deemed to have reached maturity for IPO but delays it without valid reason, the investor may formally request the IPO in writing. The company shall then provide the investor with a written schedule and plan for the IPO. The company and its major shareholders understand that the investor may sell its shares if an IPO is not completed within two years and shall make their best efforts to fulfill the obligations herein. Article 15 (Liability of the Company and Major Shareholders) The investor may claim damages from the company and its major shareholders in the following cases: False representations or breach of obligations under this agreement that remain unremedied within 60 days of written notice; Insolvency events such as bankruptcy, composition, or suspension of bank transactions; Business suspension due to legal changes, judgments, or government orders. Furthermore, if the company or major shareholders violate Articles 6 through 8, they shall compensate the investor for the greater of: ① the investment amount, ② proceeds from the sale of shares in violation of Articles 6–7, or ③ the amount specified in Paragraph 3, as the minimum damages amount. After the investment was made, the plaintiff urged the defendant to fulfill its IPO obligation and to present a concrete plan. About eight months later, the plaintiff demanded the return of its investment on the ground of non-performance of the IPO obligation. When the defendant failed to comply, the plaintiff filed a lawsuit seeking repayment of the investment and accrued interest pursuant to Article 15(2). 2. Court’s Decision The court dismissed the plaintiff’s claim, holding that the company had not violated its IPO obligation for the following reasons: Article 8(1) used the expression “shall proceed to list (상장하도록 하여야 한다)” for KONEX listing but “shall list (상장하여야 한다)” for KOSDAQ listing. The former was interpreted as an obligation to endeavor to list, rather than a definitive obligation to achieve listing. Article 8(3) imposed a duty to propose an IPO schedule but did not set a fixed date. Article 8(4) required the company to “make its best efforts,” which indicates a duty of effort rather than a duty to achieve a result. Therefore, the defendant’s obligation was characterized as an obligation of means, not an obligation of result, and it could not be concluded that the company failed to perform its IPO obligation. Additionally, even if the company had breached its IPO obligation, the court held that Article 15(2)—which allowed the investor to claim damages for such breach—was void as contrary to the principle of shareholder equality, since it granted preferential rights or benefits to certain shareholders. 3. Commentary and Analysis While the court’s conclusion may be acceptable, the reasoning leaves room for discussion. Specifically, interpreting “shall proceed to list” merely as a best-effort clause seems debatable, since the expression “shall” inherently implies a binding obligation. Furthermore, in contrast to Article 8(2), which uses the phrase “shall act in good faith,” Article 8(1) could be understood as imposing a more definite obligation. Nevertheless, the court placed significant weight on the procedural safeguard under Article 8(3)—which requires a written IPO request and response—as well as the “best efforts” clause in Article 8(4), concluding that the mere failure to complete listing within the stated timeline did not constitute a breach of the IPO obligation. Similarly, in a more recent decision (Seoul Central District Court, Jan. 17, 2025, Case No. 2023Gahap95494), the court dismissed an investor’s claim for damages under a comparable IPO clause. It reasoned that the clause could not be interpreted as granting the investor an unconditional right to damages merely because the company failed to complete an IPO, but only where the company had willfully delayed or breached key contractual obligations that made listing otherwise feasible. 4. Practical Implications These decisions suggest that Korean courts tend to interpret IPO obligation clauses in investment agreements strictly and conservatively. However, they do not deny the validity of such clauses outright; rather, they assess their meaning on a case-by-case basis, in accordance with the general principles of contract interpretation established by the Supreme Court (Decision 2019Da226395, Mar. 31, 2022). Under these principles, when the literal meaning of a clause is ambiguous, courts must interpret it in light of its wording, the purpose and background of the agreement, the parties’ intent, and prevailing commercial practices, to reach a reasonable interpretation consistent with justice and fairness. Accordingly, both investors and investee companies should exercise great care when negotiating and drafting IPO-related provisions to ensure that the wording accurately reflects their intended level of obligation—whether it be a binding commitment or a best-effort undertaking. 5. VEAT Law Firm’s Insight Disputes like the present case underscore the importance of precise contract drafting. At VEAT Law Firm, we have extensive experience in investment contracts, mergers and acquisitions, and corporate finance matters. Our capabilities have been recognized globally—Bloomberg’s 2024 M&A League Table ranked VEAT 7th in Korea by number of transactions—demonstrating our trusted expertise in complex investment advisory work. For tailored legal advice regarding investment agreements, IPO obligations, or dispute prevention strategies, please feel free to contact VEAT Law Firm. Sincerely, VEAT Law Firm