On May 21, 2014, the Korea Fair Trade Commission (“KFTC”) announced that it will streamline industry guidelines for standard contracts which may overly constrain corporate activities. The Pharmaceutical Industry Fair Trade Guidelines and the Guidelines for Patent License Agreements are among those that will be repealed by the KFTC.
By modifying the “positive” regulations (e.g. prohibitions unless an exception applies) under the current industry guidelines for standard contracts into “negative” regulations which are the general principles of the Monopoly Regulation and Fair Trade Act (“MRFTA”), the KFTC is aiming to encourage autonomous corporate activities. On the other hand, the KFTC will explicitly stipulate the standards to determine illegality/unfairness in its examination guidelines or relevant legislation.
The Pharmaceutical Industry Fair Trade Guidelines to Be Repealed
The Pharmaceutical Industry Fair Trade Guidelines which are in the form of a standard contract were enacted on December 28, 2012 in order to prevent unfair pharmaceutical contracts between pharmaceutical companies (in particular, between a supplier and a distributor).
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The Guidelines for Patent License Agreements to Be Repealed
On January 17, 2012, the Guidelines for Patent License Agreements were enacted to protect medium- or small- sized businesses with limited legal resources.
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Provisions that will be repealed concern ① royalties, ② evidence requirements concerning royalties, ③ raw material purchase, ④ restrictions on the territory, ⑤ restrictions on the price and quantity of goods, ⑥ restrictions on dealing with competing products/technology, ⑦ obligations to deal with other products/technology, ⑧ technical improvement, ⑨ effects of patent invalidation, and ⑩ agreement not to challenge patent invalidity.
Abolishment of “positive” regulations under the fair trade industry guidelines including the two afore-mentioned guidelines for the pharmaceutical industry is expected to encourage and increase autonomous corporate activities. In particular, the repeal of the Pharmaceutical Industry Fair Trade Guidelines which are in the form of a standard contract and have been criticized as overly burdensome to suppliers and patentees is expected to increase the autonomy of contracts.
However, the repeal of these guidelines is simply the KFTC’s efforts to improve and streamline the existing regulations. The MRFTA and other relevant laws still regulate illegal activities and companies still need to carefully review which business activities are allowed or prohibited under the current legislation.