Startup imitators (copycats), response to the Act on Prevention of Unfair Competition

Law firm Veat recently accepted a request from Startup A (hereinafter "the client") targeting the domestic and global markets to provide legal advice to proactively respond to competing businesses that almost completely copied the client's UI/UX, terms of use, privacy policy, etc.

In the rapidly evolving digital market, a startup's creativity and agile execution are key assets for leading the market. However, these assets are also at risk of being exactly 'copied' by competitors or third parties. In fact, the problem of 'copycats' who have copied the overall business model, including UI/UX, terms of use, privacy policy, and service planning, is becoming a realistic threat that many startups face in domestic and international markets.

Law firm Veat sent a demand letter to the competing business that imitated the client's actions, demanding an immediate cessation of the illegal acts and threatening strong legal action if they recurred. By taking such proactive measures, the firm provided the client with a practical solution to protect their rights from imitation damage and focus on their business.

Recently, cases of businesses almost identically imitating a startup's planning, design, and policy documents have been increasing. In particular, startups preparing for global expansion are more likely to experience 'imitation' issues at a sensitive point in time to secure market share, which can have a serious impact on their business, going beyond just annoyance.

What is 'imitation' under the Act on the Prevention of Unfair Competition?

Under the Act on the Prevention of Unfair Competition and Protection of Trade Secrets (hereinafter "the Act on the Prevention of Unfair Competition"), 'imitation' goes beyond simple similarity of trademarks or designs, and refers to the act of unfairly using another's creative achievements or business information. In particular, according to the recently revised legislation, the configuration of UI/UX, platform structure, terms of use, and privacy policies, such as policy documents, are also included in the scope of protection, and if these are intentionally implemented in a similar manner, they can be deemed as 'an act of unfairly utilizing another's achievements.' That is, if a competitor unlawfully imitates elements reflecting a startup's creativity and strategy, it may be subject to legal sanctions as an act of unfair competition.

Proactive response to 'imitation' businesses starting with a 'demand letter'

Law firm Veat strongly demanded that the imitation business cease its illegal activities through a 'demand letter.' A demand letter does not have legal binding force, but it is an important strategic starting point for raising an official issue and can be used as important evidence in the event of a subsequent legal dispute.

This proactive measure is effective in clearly informing the imitation business of their actions and inducing them to take voluntary corrective action. In addition, to increase the effectiveness of these measures, Law firm Veat also provided the client with the following strategic advice.

Law firm Veat's subsequent strategic response

Responding to imitation businesses requires more than just protest or warning; it must be based on sophisticated strategies and legal grounds. To effectively respond to such cases, it is important to organize objective evidence to prove the circumstances of imitation and secure evidence. Initial strategic preparation is necessary, including documenting screen captures, utilizing web archives, comparing documents, and organizing internal development records, and a response strategy based on legal standards is required, rather than emotional responses.

If the imitation business does not take corrective action after a demand letter has been sent, or only superficially corrects it and continues the actual imitation, more powerful and specific legal remedies should be considered.

At this stage, a strategic approach that combines civil and criminal proceedings may be effective. First, the civil claim under Article 4 of the Act on the Prevention of Unfair Competition includes ▲ cessation and prohibition of unfair competition, ▲ claim for damages, ▲ claim for the destruction of imitated products or services, which are representative measures. This is a practical way to recover damages and prevent similar cases in the future.

In addition, if the other party's intention is clear or the scale of damage caused by imitation is substantial, criminal prosecution (e.g., obstruction of business, obstruction of business by computer equipment) should also be considered. Unlike civil lawsuits, criminal proceedings involve the direct intervention of investigative agencies, which can exert strong pressure on the other party and also serve as a negotiation tool to lead to an early settlement.

Law firm Veat provided close cooperation with the client throughout the process, from drafting the demand letter to subsequent civil and criminal response strategies, providing legal advice to avoid unnecessary disputes and focus on their core business.

Law firm Veat provides practical legal advice to startups facing imitation problems in stages, from drafting a demand letter to subsequent civil and criminal responses. Responding to imitation businesses should be approached strategically, not emotionally, and seeking advice from experts is the best way to reduce disputes and focus on business.

If you need legal advice regarding startups, copycats, imitation businesses, or the Act on the Prevention of Unfair Competition or demand letters, please feel free to contact Law firm Veat.

This business case can also be viewed on the Law firm Veat blog below.

- Imitation Businesses (Copycats) Targeting Startups, Response under the Act on the Prevention of Unfair Competition

Thank you.

Law firm Veat