Korea IP Protection for Foreign Tech Companies: NCT, NAST, and Technology Transfer Rules 2026

Table of Contents

Introduction: The Hidden Investment Screening Most Foreign Tech Companies Don’t Know About

When foreign tech companies think about entering Korea, they typically focus on:

• Company registration procedures
• Tax incentives
• Visa requirements for key personnel

What many don’t realize until deep into negotiations: Korea operates a sophisticated technology screening system that can block or delay investments in companies holding sensitive IP.

If your acquisition target or investment candidate holds:

• NCT (National Core Technology) - 국가핵심기술
• NAST (National Advanced Strategic Technology) - 국가첨단전략기술

…you’ll need government approval before closing the deal. This can add:

• 30-90 days to transaction timeline
• Complex disclosure requirements
• Potential deal rejection (rare but possible)

In 2026, Korea has expanded these lists and tightened enforcement. This guide explains:

• What NCT and NAST actually are
• Which technologies are covered
• Investment screening procedures
• How foreign tech companies can protect their IP when entering Korea
• Compliance strategies for M&A, joint ventures, and technology licensing

Understanding Korea’s Technology Protection Framework

The Three-Layer System

Korea’s IP/technology protection operates at three levels:

Key Point: Levels 2 and 3 create pre-investment screening obligations that general IP doesn’t trigger.

What Is NCT (National Core Technology)?

Definition

National Core Technology refers to technologies that, if leaked abroad, would:

• Significantly harm national security
• Severely damage Korea’s economic competitiveness
• Undermine critical infrastructure

Examples of NCT-Designated Technologies (2026)

The Ministry of Trade, Industry and Energy (MOTIE) maintains a classified list. Publicly disclosed categories include:

1. Semiconductors

• Advanced process nodes (<5nm)
• EUV (Extreme Ultraviolet) lithography techniques
• High-bandwidth memory (HBM) architecture
• Semiconductor manufacturing equipment design

2. Defense/Aerospace

• Precision-guided munitions technology
• Radar/electronic warfare systems
• Satellite communication encryption
• Stealth technology applications

3. Electric Vehicle Batteries

• Solid-state battery chemistry
• Battery management system (BMS) algorithms
• Cathode/anode material formulations
• Battery pack thermal management

4. Display Technology

• OLED panel manufacturing processes
• Flexible display materials
• Quantum dot technology
• Micro-LED production methods

5. Steel/Materials

• High-strength automotive steel formulas
• Specialty alloys for shipbuilding
• Carbon fiber production techniques

6. Biotechnology

• Vaccine development platforms
• Cell therapy manufacturing processes
• Gene editing tools (CRISPR applications)

How Companies Are Designated

MOTIE designates technologies as NCT through:

1. Industry-specific review - Ministry consults sector experts
2. Technology assessment - Evaluates global competitiveness and substitutability
3. Economic impact analysis - Estimates damage if technology leaked
4. Designation notice - Company holding technology is formally notified

Important: Companies are prohibited from disclosing their NCT designation publicly (trade secret protection). This creates information asymmetry for foreign investors.

What Is NAST (National Advanced Strategic Technology)?

Definition

Introduced in 2023 and expanded in 2025-2026, NAST covers technologies that:

• Impact national/economic security
• Affect supply chain stability
• Have significant ripple effects on related industries
• Are critical for export competitiveness

NAST vs NCT: Key Differences

NAST-Designated Sectors (2026)

1. Semiconductors (chips, equipment, materials)
2. Rechargeable batteries (Li-ion, solid-state, BMS)
3. Vaccines/biologics
4. Displays (OLED, QD, micro-LED)
5. Hydrogen energy (fuel cells, electrolyzers, storage)
6. Advanced robotics (industrial, medical, service robots)
7. Artificial intelligence (foundation models, edge AI, semiconductor design AI)
8. Quantum computing (qubits, quantum encryption)
9. Carbon capture technology (CCUS systems)
10. Advanced materials (graphene, nanomaterials, rare earth alternatives)

2026 Addition: AI and quantum technologies were added to NAST list in late 2025.

Investment Screening Process for NCT/NAST

When Screening Is Required

Foreign investment screening kicks in when:

For NCT:

• Foreign investor acquires ≥50% of shares in Korean company holding NCT
• Foreign investor gains effective control (even if <50% stake) through:
  • Board majority
  • Management appointment rights
  • Veto rights over key decisions

For NAST:

• Thresholds vary by technology (typically 30-50%)
• Some NAST sectors require notification even for minority stakes with board seats

Important: Screening applies to:

• Direct equity purchases
• Mergers
• Asset acquisitions (if technology is transferred)
• Joint ventures (if JV will hold NAST/NCT)

Step-by-Step Screening Procedure

Stage 1: Pre-Transaction Due Diligence

Foreign Investor’s Responsibility:

1. Request disclosure from target company:
   • “Does your company hold any NCT or NAST-designated technology?”
   • List all patents/trade secrets related to core business
2. Engage Korean legal counsel to cross-reference with MOTIE lists
3. Conduct technology audit

Challenge: Target companies may not know they hold NCT (designation can happen after company developed the technology).

Stage 2: Filing with MOTIE

Required Documents:

• Foreign Investment Notification (FDI standard form)
• Additional NCT/NAST disclosure:
  • Technology description
  • Foreign investor’s business model
  • Intended use of technology
  • IP protection plan
  • Economic benefit to Korea (jobs, R&D investment)

Timeline:

• File before closing transaction
• MOTIE has 30 days to respond (extendable to 90 days for complex cases)

Stage 3: Review by Industrial Technology Protection Committee

Committee Composition:

• MOTIE officials
• National Intelligence Service (NIS) representative
• Ministry of Science & ICT
• Industry experts
• Academic researchers

Evaluation Criteria:

Stage 4: Possible Outcomes

1. Unconditional Approval (40% of cases)

• No restrictions
• Transaction proceeds normally

2. Conditional Approval (50% of cases)

• Technology use restrictions:
  • Cannot transfer production facilities outside Korea for X years
  • Cannot license technology to third parties without approval
  • Must maintain minimum R&D staff in Korea
• Ownership restrictions:
  • Cannot resell to certain countries
  • Board composition requirements (minimum Korean nationals)
• Reporting obligations:
  • Annual technology status reports
  • Notify before any IP transfers

3. Denial (<5% of cases)

• Extremely rare
• Usually only when:
  • Clear national security threat
  • Investor has history of IP violations
  • Technology is defense-related and investor is from non-allied nation

4. Withdrawn/Abandoned (5% of cases)

• Investors withdraw after seeing conditions
• Deal economics no longer work with restrictions

Technology Transfer and Licensing Rules

Outbound Technology Transfer (Korea → Foreign Entity)

Separate from investment screening, transferring NCT/NAST technology abroad requires approval:

Triggering Activities:

• Licensing IP to foreign company
• Establishing overseas production facility using NCT
• Technical consulting that discloses NCT details
• Employment of Korean engineers who worked on NCT (non-compete issues)

Approval Process:

1. File export license application with MOTIE
2. Justify economic benefit (royalties, market expansion)
3. Prove adequate IP protection in destination country
4. Typical timeline: 30-60 days

Penalties for Unauthorized Transfer:

• Up to 15 years imprisonment
• Fines up to 1.5x economic benefit gained
• Blacklisting from government R&D funding

Inbound Technology Transfer (Foreign → Korea)

Generally encouraged with few restrictions, but consider:

Tax Implications:

• Royalty payments to foreign parent: 20% withholding tax (reduced by treaty)
• Transfer pricing rules apply (arm’s length standard)

IP Registration:

• Foreign patents should be registered in Korea for enforcement
• Korean Patent Office (KIPO) process: 12-18 months for examination

Practical Scenarios for Foreign Tech Companies

Scenario 1: US Semiconductor Equipment Maker Acquiring Korean Materials Supplier

Facts:

• Target: Korean company producing advanced photoresist materials
• Technology: Likely NAST-designated (semiconductor materials)
• Deal: 80% stake acquisition

Process:

1. Due diligence reveals target holds 3 patents related to EUV photoresist
2. Legal counsel confirms NAST applicability
3. File foreign investment notification with MOTIE
4. Committee review (60 days)
5. Conditional approval granted:
   • Must maintain production facility in Korea for 7 years
   • Cannot license technology to Chinese entities
   • Annual R&D spend minimum: ₩5 billion
6. Transaction closes with conditions incorporated into shareholders’ agreement

Timeline Impact: Added 2.5 months to originally planned 4-month deal cycle.

Scenario 2: European Battery Company JV with Korean Automaker

Facts:

• JV structure: 50/50 ownership
• Technology: European partner contributes solid-state battery IP, Korean partner contributes manufacturing expertise
• Production: Joint facility in Korea

Issue:

• JV will hold both European IP and develop new NCT (battery tech)
• Question: Does foreign partner’s 50% stake trigger screening?

Resolution:

• Legal structure: JV holds manufacturing operations only
• IP stays with respective parents, licensed to JV
• Foreign partner has <50% voting rights (special share structure)
• Avoids NCT screening trigger
• MOTIE informal pre-approval obtained

Key Lesson: Structuring matters. Creative deal architecture can avoid or simplify screening.

Scenario 3: Chinese AI Company Investing in Korean Startup

Facts:

• Target: Korean AI startup developing semiconductor design optimization AI
• Technology: Recently designated as NAST (AI sector)
• Investment: 35% stake, 2 board seats

Process:

1. Investment triggers NAST notification
2. Heightened scrutiny due to:
   • Investor nationality (China)
   • Dual-use technology (chips = defense applications)
   • Escalating US-China tech tensions
3. Committee requests additional information:
   • Investor’s ties to Chinese government
   • Data security protocols
   • IP firewall measures
4. Conditional approval after 85-day review:
   • Korean startup must maintain majority Korean board
   • Source code cannot be transferred to China
   • Investor cannot appoint CTO or Chief Scientist
   • Korean government observer seat on board

Outcome: Deal proceeds, but with significant operational constraints.

IP Protection Strategies for Foreign Companies Entering Korea

Strategy 1: Pre-Investment Technology Audit

Before establishing Korean operations or investing, conduct:

1. Patent landscape analysis - Identify potential NCT/NAST overlap with your technology
2. Freedom-to-operate study - Ensure you’re not infringing Korean IP
3. Competitive intelligence - What technologies do Korean players already have?

Why It Matters:

• Avoid investing in Korea only to discover you cannot transfer your core technology
• Identify which IP to keep offshore vs which to bring to Korean entity

Strategy 2: Tiered IP Architecture

Don’t put all IP in Korean subsidiary. Instead:

Tier 1: Core IP (Offshore)

• Foundation patents
• Trade secrets
• Source code repositories
• Kept in home country entity

Tier 2: Licensed IP (to Korea)

• Manufacturing know-how
• Localization improvements
• Market-specific innovations
• Licensed to Korean subsidiary (royalty-generating)

Tier 3: Local IP (Korea-owned)

• Korean market adaptations
• Compliance-related developments
• Non-core improvements
• Owned by Korean entity

Benefits:

• Limits NCT/NAST exposure (Tier 1 stays clean)
• Facilitates exit (can sell Korean entity without core IP)
• Tax optimization (royalty flows)

Strategy 3: R&D Collaboration Agreements

When partnering with Korean companies for joint development:

Critical Contract Clauses:

1. IP Ownership Split:

   • Background IP: Each party retains ownership
   • Foreground IP (jointly developed): Define allocation upfront
   • Avoid “equal co-ownership” (creates licensing nightmares)

2. Technology Use Restrictions:

   • Geographic limitations
   • Field-of-use restrictions
   • Sublicensing rights

3. Termination/Buyback Rights:

   • What happens to jointly developed IP if partnership ends?
   • Right of first refusal on IP sale

4. NCT/NAST Disclosure:

   • Korean partner must notify if technology becomes designated
   • Foreign partner has option to restructure or exit

Strategy 4: Employee Mobility and Trade Secret Protection

Challenge: Korean engineers who work on your technology may be recruited by competitors.

Korean Trade Secret Law (부정경쟁방지법) Protections:

✅ Enforceable:

• Non-disclosure agreements (NDAs)
• Trade secret designation in employment contracts
• Non-compete clauses (up to 2 years, must include compensation)

❌ Difficult to enforce:

• Non-competes beyond 2 years
• Non-competes without pay (unenforceable)
• Overly broad restrictions

Best Practices:

1. Classify technology as designated trade secrets (지정영업비밀)
2. Implement access controls (limited personnel)
3. Use non-compete agreements with compensation (typically 50-100% of salary during restriction period)
4. Mark all documents with confidentiality notices
5. Conduct exit interviews with IP acknowledgment forms

Common Mistakes Foreign Tech Companies Make

Mistake 1: Assuming All Patents Are Equal

Wrong Assumption: “We have 50 patents in Korea, none are special.”

Reality: Any patent remotely related to NCT/NAST sectors could be retroactively designated after you’ve already entered the market.

Fix: Proactive disclosure to MOTIE during FDI notification. Don’t wait for them to discover it.

Mistake 2: Using Korean Subsidiary as Global R&D Hub Without Screening

Scenario: US company sets up Korean R&D center. Korean team develops breakthrough technology. US parent wants to transfer it back to HQ for global commercialization.

Problem: If technology qualifies as NCT, outbound transfer requires approval. This can block or delay global product launch.

Fix: Structure R&D agreements so IP ownership vests with US parent from creation (work-for-hire model), avoiding transfer step.

Mistake 3: Ignoring NAST Changes

Issue: NAST list is updated annually. Technology that was unrestricted in 2025 may be designated in 2026.

Recent Example: AI semiconductor design tools were added to NAST in late 2025. Several foreign investors in Korean AI chip startups had to retroactively file notifications.

Fix: Subscribe to MOTIE announcements, engage Korean legal counsel for monitoring.

Mistake 4: Over-Disclosure During Due Diligence

Scenario: Foreign investor requests full technology disclosure from Korean target during due diligence.

Problem: If deal falls through, foreign investor now has detailed knowledge of NCT. Korean company may claim trade secret misappropriation if investor develops similar technology.

Fix:

• Use tiered disclosure (high-level first, detailed only after LOI/exclusivity)
• Sign robust NDAs with injunctive relief clauses
• Consider clean team structures for sensitive tech review

2026 Regulatory Trends

Expansion of NAST Categories

New Additions Expected in 2026:

• Carbon capture & storage (CCUS) - Korea’s net-zero strategy
• Advanced nuclear (SMR) - Small modular reactors
• Space technology - Satellite propulsion, launch systems
• Bio-manufacturing - Synthetic biology platforms

Impact: Broader range of foreign investments will require screening.

Heightened Scrutiny on Data-Driven Technologies

With rise of AI and big data, Korean authorities are concerned about:

• Training data sovereignty (Korean language datasets)
• Algorithm export controls
• AI model parameter restrictions

Emerging Practice: MOTIE may condition approvals on:

• Keeping training data in Korea
• Not transferring model weights abroad
• Local deployment requirements

Reciprocal Treatment Analysis

Korea is increasingly evaluating how foreign investor’s home country treats Korean investors:

Examples:

• US CFIUS (Committee on Foreign Investment) blocks Korean investments → MOTIE applies similar scrutiny to US investors
• EU subsidies restricted to EU companies → Korea may limit R&D funding to Korean-controlled entities

Practical Impact: Investors from countries with restrictive FDI regimes face tougher reviews in Korea.

Checklist for Foreign Tech Investors

Before Investment/Entry

• Conduct technology audit against NCT/NAST lists
• Engage Korean IP/FDI counsel
• Structure IP ownership to minimize NCT exposure
• Plan for 30-90 day approval timeline in deal schedule
• Prepare economic benefit narrative (jobs, R&D, exports)

During Transaction

• File FDI notification early (don’t wait until closing)
• Respond promptly to MOTIE information requests
• Negotiate conditional approval terms that preserve deal value
• Update shareholders agreement to reflect any restrictions

Post-Closing

• Comply with annual reporting obligations
• Monitor NAST list updates (new designations)
• Implement technology access controls per approval conditions
• Maintain Korea-based R&D commitments
• Plan exit strategy within restriction framework

How SMA Lawfirm Can Help

Navigating Korea’s technology protection regime requires specialized expertise. We provide:

✅ Pre-Investment NCT/NAST Screening - Identify risks before you commit capital
✅ MOTIE Approval Filings - Handle entire notification/review process
✅ IP Structuring - Design tiered architecture to protect core technology
✅ M&A Due Diligence - Technology audit and risk assessment
✅ Technology Transfer Compliance - Outbound licensing approvals
✅ Regulatory Monitoring - Track NAST updates and policy changes

Conclusion: Protection Cuts Both Ways

Korea’s NCT/NAST regime can seem like a barrier to foreign investment. But it also provides strong IP protection that benefits foreign companies:

Protections You Gain:

• Trade secret enforcement (criminal penalties for theft)
• Technology-focused courts (patent litigation expertise)
• Border measures (customs can block IP-infringing imports)
• Strong alignment with US/EU IP standards

The Balance: Yes, you’ll face scrutiny when acquiring Korean companies with advanced technology. But once you establish operations in Korea, your technology gets the same protection from competitors.

The key is understanding the rules upfront, structuring deals appropriately, and viewing compliance as relationship-building with Korean regulators rather than obstacle.

📩 Need Help with NCT/NAST Compliance?

Planning to invest in Korean tech company? Concerned about technology transfer restrictions? Want to structure IP ownership to minimize screening risks?

Contact SMA Lawfirm:
📧 sma@saemunan.com
🌐 startcompanykorea.com

We specialize in helping foreign tech investors navigate Korea’s technology protection regime efficiently and successfully.

Disclaimer: This article provides general information based on regulations current as of February 2026. NCT designations are confidential and individual cases vary. NAST categories are subject to change. Always consult qualified Korean legal counsel for specific investment decisions involving technology screening.

Sources: Industrial Technology Protection Act, National High-Tech Strategic Industries Act, MOTIE public guidance, Chambers Global Practice Guides 2026, ICLG FDI Report 2026.