Introduction

The Korean Fair Trade Commission (KFTC) recently conducted another IP survey of approximately 70 pharmaceutical companies (approximately 40 foreign and 30 domestic), seeking detailed information regarding their major products, patents and litigation disputes involving intellectual property in South Korea.

This follows an earlier survey conducted by the KFTC in 2010, which also sought similar information from 48 pharmaceutical companies (30 multinational and 18 domestic).

Background

The new KFTC survey seems to have been driven by two major factors.

First, in December 2016 a new Knowledge Industry Anti-monopoly Division was established within the KFTC with a specific remit to investigate abuses and increase competition enforcement in knowledge-based industries (eg, pharma, biotech and internet technology). Moreover, the new governing administration in South Korea has indicated a greater desire to scrutinise companies' fair trade practices in general.

Second, there was a dramatic increase in the number of patent disputes filed between original drug manufacturers and generics after the implementation of the pharmaceutical product approval-patent linkage system in South Korea in 2015. Thus, the KFTC appears interested in investigating any changes in pharmaceutical companies' IP practices since the patent linkage system was implemented, particularly regarding any settlement agreements or other business arrangements that may have been entered into as a result of such IP disputes.

Subject of survey

The KFTC appears to have selected the companies targeted by the new survey mostly based on recent sales information, while also taking into account media reports regarding various patent disputes. The questionnaire focused on 202 active pharmaceutical ingredients (APIs) selected from a list of prescription drugs with sales exceeding W8 billion (approximately $7 million) in 2015. The questionnaire sought details regarding prescription drugs containing the above APIs, which were released in South Korea or for which drug approval was sought between 2010 and 2016. These details included information regarding:

  • the status of launch and sale of original drugs, incrementally modified drugs and generic drugs;
  • the status of related patent licence agreements;
  • related patent filing strategies;
  • the status of related potential disputes;
  • related litigations filed;
  • any other contracts, agreements, cooperation agreements or arrangements with other pharmaceutical companies (not necessarily limited to the designated 202 APIs); and
  • use of the South Korean patent-approval linkage system.

The questionnaire was issued around the end of May 2017 and the responses were due in late June to mid-July.

Anticipated course of action

The KFTC will now review the information it has received, and will likely decide in the next few months whether further investigation is needed against specific companies based on the information and materials that have been submitted. If the KFTC finds that a company's response was inadequate or raises additional questions, it may issue a follow-up request for information (RFI). Alternatively, if the KFTC believes that a response is particularly suspicious, it may conduct an ex parte raid on the responding company. In 2010 the KFTC issued follow-up RFIs to several companies and conducted dawn raids. The KFTC is likely to be more aggressive in conducting follow-up investigations this year since this is the first industry survey to be conducted by the new Knowledge Industry Anti-monopoly Division.

Other industries should stay alert

While this survey is limited to pharmaceutical companies, the KFTC may decide to investigate and issue surveys in other industries in order to determine whether IP abuse is occurring in those areas as well. For instance, between 2010 and 2011, after conducting its pharmaceutical industry survey, the KFTC issued similar surveys to the IT, chemical and mechanical industries.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact Young Kim, Gene-Oh Kim, Kyung Yul Lee or Inchan Andrew Kwon at Kim & Chang by telephone (+82 2 3703 1114) or email (ykim@kimchang.com, gokim@kimchang.com, kyungyul.lee@kimchang.com or ickwon@kimchang.com). The Kim & Chang website can be accessed at www.kimchang.com.