2026 Subcontracting Act: New Injunction Right Explained

One of the most pressing legal issues in Korean industry for 2026 is undoubtedly the Subcontracting Act. In particular, the problem of "technology misappropriation," where large enterprises unfairly appropriate core technologies from small and medium-sized subcontractors, has resurfaced. Recently, major law firms have begun hosting related seminars, signaling proactive movement within the legal market. This trend, coupled with the Fair Trade Commission's (FTC) intensified enforcement stance, suggests a search for fundamental solutions that go beyond mere administrative fines.

While past sanctions were limited to ex-post compensation for damages already incurred, the discussion's focus is now shifting towards strengthening the effectiveness of the "injunction right" to prevent harm itself. Attention is drawn to whether this powerful legal right, capable of preemptively halting technology misappropriation, can truly become an effective weapon for small and medium-sized enterprises (SMEs) or merely remain another symbolic regulation. The direction of the 2026 Subcontracting Act will be a critical test, transcending mere inter-corporate disputes, to gauge the future of Korea's innovation ecosystem and fair competition.

Table of Contents

• Technology Misappropriation: Why the Renewed Focus?
• A History of Lenient Penalties: Sanctions, But Insufficient
• FTC Sharpens Its Claws: Tightening Rules from Payment Stability
• The New Weapon: Debates on the Effectiveness of the Injunction Right
• What Businesses Must Prepare For: The Perspective of Prime Contractors
• Opportunity and Risk: SMEs' Response Strategies
• 2026 Subcontracting Act: A Testbed for Coexistence and Mutual Growth?

Technology Misappropriation: Why the Renewed Focus?

Why is the issue of technology misappropriation, long pointed out as a chronic problem in subcontracting relationships, receiving renewed attention in 2026? This isn't merely due to discussions of legal amendments. It's because technology has become a core asset determining a company's survival, and a societal consensus has spread that technology theft is a severe crime threatening a company's very existence.

The recent announcement by Law Firm Sejong about its seminar, "2026 Technology Misappropriation, Injunction Right, and Latest Trends in Subcontracting Act," substantiates this market interest. This can be interpreted as a signal that related disputes are increasing among legal professionals, and companies' demand for legal responses is growing. While SMEs lose their growth momentum when their hard-earned technology is stolen, large enterprises, though they might gain short-term profits, ultimately destroy the industrial ecosystem and stifle innovation in the long run.

Amidst this awareness, the government's and legislature's determination to strengthen regulations appears stronger than ever. As the policy signal that technology misappropriation will no longer be tolerated becomes clear, companies must also seek new strategies to adapt to the changed regulatory environment.

A History of Lenient Penalties: Sanctions, But Insufficient

Of course, sanctions against technology misappropriation were not absent in the past. The Fair Trade Commission has consistently detected unfair subcontracting practices and imposed corrective orders and administrative fines. A representative case is the FTC's sanction in September 2025 against Jeonggwang Tech Co., Ltd. for demanding and misappropriating technical data. The prime contractor was held strictly accountable for unfairly demanding technical data from its subcontractor and transferring it to another business.

However, despite these sanctions, criticism in the field persistently lamented "too lenient penalties." According to some media reports, while the overall scale of FTC's administrative fines for fair trade is trending upwards, there have been many criticisms that the level of administrative fines for Subcontracting Act violations, especially technology misappropriation, has been inadequate compared to the scale of damage or the maliciousness of the act.

Given that the administrative fine amount was far too low compared to the immense profits gained by prime contractors through technology theft, sanctions often failed to pose a substantial threat to some companies. Instead, a misguided perception even spread where administrative fines, if detected, were viewed as mere "business costs." This history of "lenient penalties" is cited as one of the primary reasons why the unfair practice of technology misappropriation could not be eradicated and instead recurred.

FTC Sharpens Its Claws: Tightening Rules from Payment Stability

Amidst repeated criticism, the Fair Trade Commission is also sharpening its regulatory resolve. Notably, there's a visible move to secure overall fairness in subcontracting transactions before directly addressing technology misappropriation. The "Comprehensive Measures to Enhance Stability of Subcontracting Payment" announced in October 2025 is a prime example.

These measures go beyond merely requiring timely payments, including structural improvement plans such as the introduction of a subcontracting payment linkage system that reflects raw material price fluctuations in supply unit prices, and promoting active reporting of unfair subcontracting. This represents a multi-faceted approach to alleviate the power imbalance between prime contractors and subcontractors, enhance transactional transparency, and preemptively block the possibility of unfair acts like technology misappropriation.

A recent review of subcontracting payments for Hanwha Group affiliates clearly demonstrates the practical pressure this intensified regulatory stance places on large enterprises. According to a report by fetv.co.kr, while Hanwha Ocean was found to have overpaid in some cases, Hanwha Solutions was pointed out to have improvement tasks regarding its cash payment ratio. This signifies that large enterprises must now meticulously manage their entire transactional practices, including subcontracting payment methods.

The New Weapon: Debates on the Effectiveness of the Injunction Right

At the pinnacle of this regulatory strengthening trend is the "injunction right." Article 25-3 of the Subcontracting Act stipulates that if there is a risk of significant damage due to technology misappropriation, the subcontractor may seek an injunction from the court to prohibit or prevent such act. This is a powerful preemptive remedy that goes beyond monetary compensation for damages already incurred, entirely preventing the damage itself.

For example, if there is evidence that a prime contractor is planning to produce products by misappropriating a subcontractor's technology, the subcontractor can ask the court to stop the production and sale of those products. This can be far more effective than protracted damages lawsuits that begin only after products have already saturated the market and immense losses have occurred.

The issue lies in its effectiveness. Although the legal provision exists, it is by no means easy for an SME to prove technology misappropriation and demonstrate "the risk of significant damage" in actual litigation. The process for an SME, at an absolute disadvantage in terms of information and financial resources, to obtain a provisional injunction order against a large enterprise in court is arduous. The core of the 2026 Subcontracting Act amendment discussions lies in easing this burden of proof for the injunction right and expediting procedures to make it a genuinely usable weapon for SMEs.

What Businesses Must Prepare For: The Perspective of Prime Contractors

The strengthened regulatory environment demands a new level of compliance management from prime contractors, i.e., large enterprises. Simply adding a few clauses to contracts, as in the past, is insufficient. Now, they must review legal risks in every process of receiving technical data from collaborating companies.

First, the procedures for requesting technical data must be entirely re-evaluated. The Subcontracting Act stipulates that technical data may only be requested in writing, specifying the purpose of the request and confidentiality matters, and only when there is a legitimate reason. The practice of casually requesting data verbally or via email must be immediately discontinued. All requests must be made in writing, satisfying clear legal requirements, and meticulous records must be kept.

Second, internal employee training is essential. It is common for practical staff to violate the law because they are not properly aware of Subcontracting Act regulations. Regular training on the Subcontracting Act should be conducted, especially for employees in R&D and procurement departments, to clearly inform them of the legal definition of technology misappropriation and types of prohibited acts. The excuse "I didn't know" will no longer be accepted.

Opportunity and Risk: SMEs' Response Strategies

The strengthened Subcontracting Act clearly presents an opportunity for technologically advanced SMEs. However, the law alone does not solve everything. Thorough preparation is necessary to protect one's rights.

The most crucial aspect is "documentation." When providing technical data to a prime contractor, it is essential to always exchange written documents containing specific details about what data was provided, for what purpose, and when. Signing a Non-Disclosure Agreement (NDA) is fundamental. The habit of systematically managing and storing all communication, including emails, meeting minutes, and messenger conversations between personnel, can serve as decisive evidence in the event of a dispute.

Furthermore, it is important to seek assistance from legal professionals immediately if technology misappropriation is suspected. The outcome can depend on how evidence is secured and legal procedures are pursued in the early stages. The timing for exercising the injunction right is crucial. If time is delayed, evidence may disappear, or the prime contractor may complete product launch, making it difficult to reverse the situation.

2026 Subcontracting Act: A Testbed for Coexistence and Mutual Growth?

The winds of change surrounding the 2026 Subcontracting Act are strong. This signifies a paradigm shift beyond merely increasing the severity of punishment, aiming to preemptively block technology misappropriation and protect SME innovation itself. The strengthening of the injunction right stands at the center of this transformation.

Of course, unfair practices that have persisted for decades will not disappear overnight with changes in laws and systems alone. However, what is clear is that technology misappropriation has now become a serious risk threatening a company's reputation and survival. Prime contractors can only secure sustainable growth if they perceive their collaborators not merely as targets for cost reduction but as innovative partners with whom to grow together.

Future developments will serve as a significant litmus test to determine whether the Korean industrial ecosystem can move towards a genuine model of coexistence and mutual cooperation. Whether the blade of the law will contribute to creating a fair playing field for all, or become another source of conflict, is something we must all observe.