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Intellectual property law
Under what statutes, regulations or case law are intellectual property rights granted? Are there restrictions on how IP rights may be enforced, licensed or otherwise transferred? Do the rights exceed the minimum required by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?
IP rights are granted under the following legislative acts:
- the Patent Act;
- the Utility Model Act;
- the Trademark Act;
- the Design Protection Act;
- the Copyright Act;
- the Act on the Protection of New Varieties of Plants;
- the Act on the Layout-Designs of Semiconductor Integrated Circuits; and
- the Unfair Competition Prevention and Trade Secret Protection Act (the Unfair Competition Act).
Protection of geographical indications can be afforded by the Trademark Act (if they are registered trademarks) or by the Unfair Competition Act. There are several court cases recognising publicity rights, while there is no legislative act protecting them.
IP rights such as patents, utility models, trademarks, designs and semiconductor layout design rights are enforceable only after they are registered with the Korean Intellectual Property Office (KIPO). Plant variety protection rights are enforceable upon registration with the Korea Seed & Variety Service. Copyright and trade secrets do not require registration to be enforced.
IP rights can be assigned (except for the moral rights) and licensed by agreement between the parties, on an exclusive or non-exclusive basis. Under the Patent Act, Utility Model Act and the Design Protection Act, an exclusive licence is enforceable against a third party if registered with the KIPO. A non-exclusive licence, if registered with the KIPO, would be enforceable against a successor of the patent right or an exclusive licensee after the non-exclusive licence has been registered.
As a general matter, Korean intellectual property laws meet the minimum standards established by the TRIPs Agreement.
Which authorities are responsible for granting, administering or enforcing IP rights?
The KIPO is responsible for granting and administering patents, trademarks, designs, utility models and semiconductor layout designs.
The Korea Copyright Commission, designated by the Minister of Culture, Sports and Tourism, handles copyright registration and dispute resolution procedures. The Korea Seed & Variety Service is responsible for administering (including granting relevant registrable IP rights) the Act on the Protection of New Varieties of Plants.
The Intellectual Property Trial and Appeal Board (IPTAB) is an administrative tribunal under the auspices of the KIPO, and manages administrative actions relating to IP rights. Administrative actions before the IPTAB include: (i) appeals against KIPO’s final rejections of applications; (ii) invalidation actions; (iii) cancellation actions; (iv) scope confirmation actions; and (v) correction actions for patents, trademarks, designs, and utility models.
All of these IP rights are enforced through judicial proceedings conducted by the court. In cases where importation or exportation constitutes an infringement of IP rights, the Korean Trade Commission (KTC) and the Korean Customs Service (KCS) may enforce IP rights including patents, trademarks, designs and copyrights.
Proceedings to enforce IP rights
What types of legal or administrative proceedings are available for enforcing IP rights? To the extent your jurisdiction has both legal and administrative enforcement options for IP rights, briefly describe their interrelationship, if any.
As for legal proceedings for enforcing IP rights, civil lawsuits are available (see question 4). The first-instance civil action related to patent right, utility model right, designs, trademarks and plant variety protection is heard by one of the following district courts, depending on the location of the defendant: Seoul Central, Busan, Daegu, Daejeon and Gwangju District Courts. A plaintiff may also file in the Seoul Central District Court at its discretion. An appeal against the final judgment of the district courts on a civil action relating to a patent right, utility model right, designs, trademarks and plant variety protection rights are subject exclusively to the jurisdiction of the Patent Court.
Lawsuits involving the infringement of IP rights other than patents, utility models, designs, trademarks and plant variety rights can be filed in the district court having jurisdiction over the location of the defendant, and appeals must be filed in the High Court in the same jurisdiction.
As for administrative proceedings, the KCS has the authority to seize and hold imported goods that are suspected of infringing IP rights, including patents. In addition, the KTC has the administrative authority to impose administrative fines and certain corrective measures. Specifically, the KTC may investigate the import or export of goods that infringe a Korean patent as an unfair trade practice. Available remedies include: (i) corrective measures (eg, seizure and withholding of infringing goods at the border, or destruction of the infringing goods); (ii) administrative fines; and (iii) criminal penalties in case of noncompliance.
What remedies are available to a party whose IP rights have been infringed? Do these remedies vary depending on whether one utilises judicial or administrative review or enforcement?
Damages, permanent injunction and destruction of infringing goods are available in a main action for infringement of IP rights. The amount of damages is limited to actual damages and punitive damages are not recognised. Instead of actual damages, however, a copyright holder may claim statutory damages of up to 10 million Korean won per violation (50 million Korean won per violation if intentionally infringed for profit), and a trademark owner may claim statutory damages of up to 50 million Korean won. A permanent injunction almost always attaches upon an infringement decision.
A preliminary injunction may issue when there is immediate or present danger of irreparable harm to the right holder. A preliminary injunction action is a separate and distinct legal proceeding from the main action. A preliminary injunction action is brought before the district court having jurisdiction over the location of the defendant or where a related main action is pending. Preliminary injunction actions are almost always inter partes.
See question 3 for the available administrative remedies.
Criminal actions may also be pursued against an IP right infringer. An IP right holder may file a criminal complaint with the authorities (ie, police or a public prosecutor’s office) regardless of whether a civil action has been initiated.
Nexus between competition and IP rights
Do any statutes, regulations or case law in your jurisdiction address the interplay between competition law and IP law?
The Monopoly Regulation and Fair Trade Act (MRFTA) merely states in relation to IP rights in article 59 that, ‘this Act shall not apply to lawful enforcement of rights under the Copyright Act, Patent Act, Utility Model Act, Design Protection Act or the Trademark Act’.
The Korea Fair Trade Commission (KFTC) explained in this regard in its Review Guidelines on Unfair Exercise of Intellectual Property Rights (IP Guidelines) that IP right enforcement may be restricted when such an act of enforcing IP rights undermines free and fair market competition.
In addition, under article 107, paragraph 1 of the Patent Act, the KIPO Commissioner has the authority to grant a compulsory licence if it is deemed necessary to practice the patented invention to correct acts determined to constitute unfair competition in a legal or administrative proceeding.
Patent cooperation treaties and other agreements
Does your jurisdiction participate in any patent cooperation treaties or other similar agreements?
Korea participates in, among others, the following patent cooperation treaties or other similar agreements:
- the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs);
- the Convention Establishing the World Intellectual Property Organization (WIPO);
- the Paris Convention for the Protection of Industrial Property;
- the Patent Cooperation Treaty (PCT);
- the Universal Copyright Convention, as revised at Paris on 24 July 1971;
- Protocol 1 Annexed to the Universal Copyright Convention as Revised at Paris on 24 July 1971 Concerning the Application of that Convention to Works of Stateless Persons and Refugees;
- Protocol 2 Annexed to the Universal Copyright Convention as Revised at Paris on 24 July 1971 Concerning the Application of that Convention to the Works as Certain International Organizations;
- the Universal Copyright Convention;
- the Convention for the Protection of Producers of Phonograms against Unauthorized Duplication of Their Phonograms;
- the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure;
- the Berne Convention for the Protection of Literary and Artistic Works;
- the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks;
- the Strasbourg Agreement Concerning the International Patent Classification;
- the Trademark Law Treaty;
- the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks;
- the WIPO Copyright Treaty;
- the WIPO Performances and Phonograms Treaty 1996;
- the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisation;
- the Locarno Agreement Establishing an International Classification for Industrial Designs;
- the Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks;
- the Singapore Treaty on the Law of Trademarks, Regulations Under the Singapore Treaty on the Law of Trademarks and Resolution by the Diplomatic Conference Supplementary to the Singapore Treaty on the Law of Trademarks and the Regulations thereunder; and
- the Marrakesh Treaty to Facilitate Access to Published Works for Persons who are Blind, Visually Impaired, or otherwise Print Disabled.
Remedies for deceptive practices
With respect to trademarks, do competition or consumer protection laws provide remedies for deceptive practices?
Under the Unfair Competition Act, anyone whose business is or may be damaged owing to deceptive use of a trademark may file an action seeking an injunction against such deceptive practice, destruction of the articles involved and related facilities, and damages. A person who is found to have engaged in such deceptive use of a trademark may be subject to imprisonment of up to three years or a fine of up to 30 million Korean won.
Technological protection measures and digital rights management
With respect to copyright protection, is WIPO protection of technological protection measures and digital rights management enforced in your jurisdiction? Do statutes, regulation or case law limit the ability of manufacturers to incorporate TPM or DRM protection limiting the platforms on which content can be played? Has TPM or DRM protection been challenged under the competition laws?
TPMs and DRM are both protected by the Contents Industry Promotion Act and the Copyright Act. Both the Contents Industry Promotion Act and the Copyright Act prohibit deactivation of TPMs without lawful authorisation, and allows claims for injunction and damages against such acts. Any person who violates these laws may be subject to imprisonment or a fine.
There are no explicit statutes or regulation limiting the ability of manufacturers to incorporate TPM or DRM protection limiting the platforms on which content can be played. In 2006, however, the KFTC imposed a corrective order and a fine on SK Telecom, a major mobile telecom business and MP3 music provider, for implementing an exclusive DRM policy that was deemed to constitute an abuse of its dominant market position. Specifically, SK Telecom adopted an exclusive DRM strategy that only allowed MP3 files downloaded through its own music site, Melon, to be played on mobile phones serviced by SK Telecom. The court reversed the KFTC’s decision, however, by determining that there was no violation of competition law as there was no clear damage to consumers and it was inevitable for the company to adopt an exclusive DRM policy when DRM standards had not yet become mandatory.
What consideration has been given in statutes, regulation or case law to the impact of the adoption of proprietary technologies in industry standards?
There is no statute, regulation or court precedent expressly addressing the impact of the adoption of proprietary technologies in industry standards or the compulsory licensing of standard technologies.
The KFTC’s IP Guidelines mention the unfair enforcement of standard technology and standard essential patents (SEPs) as an example of unfair trade practices. In addition, the KIPO Commissioner may grant a compulsory licence under the Patent Act to deal with unfair trade practices determined by the KFTC.
The IP Guidelines set forth the following as examples of unfair trade practices, involving the abuse of standardisation procedure or imposing unfair terms or conditions after a technology has been adopted as the standard:
- unfair agreement during the negotiation process for standard technology selection relating to the transaction price, volume, territory, counterparty or restriction on improvement of the technology;
- unfairly failing to disclose information relating to patent applications or registered patents to increase the chances of being adopted as the standard technology or avoid early negotiation of licence terms;
- unfairly circumventing a licence on FRAND terms to increase monopolistic power in the market or exclude competitors;
- unfair refusal to grant a licence to use standard essential patents;
- unfair discrimination of SEP licence terms or imposition of unreasonable royalties; and
- imposing licence terms that unfairly restrict the licensee of a SEP from enforcing its patents that are related to the SEP or unfairly require the licensee to grant the SEP licensor a licence to the licensee’s non-standard essential patents.
To prevent patent hold-up, the Guidelines deem the act of seeking injunction against a willing licensee to constitute a potential restriction on market competition. As reverse hold-up could occur if the licensor is prohibited from filing an infringement action against even an unwilling licensee, the Guidelines state that the following acts are unlikely to constitute an unfair trade practice:
- if a potential licensee refuses to comply with the decision of a court or an arbitration body, or refuses to enter into a licence agreement under the FRAND terms when the specific details of the FRAND terms have been objectively verified in a court or arbitration proceeding etc; or
- if injunction against infringement is deemed to be the only remedy due to a potential licensee’s imminent bankruptcy or other reasons for which the potential licensee cannot be expected to pay damages.
What statutes set out competition law?
The primary competition law is the MRFTA. It was enacted on 31 December 1980, and became effective on 1 April 1981. The MRFTA mainly prohibits:
- abuse of market dominance;
- anticompetitive mergers;
- unlawful cartels; and
- unfair trade practices
IP rights in competition legislation
Do the competition laws make specific mention of any IP rights?
Article 59 of the MRFTA provides that the MRFTA shall not apply to any conduct that is a legitimate exercise of rights under the Copyright Act, Patent Act, Utility Model Act, Design Protection Act or the Trademark Act.
Regarding the interpretation of article 59 of MRFTA, the IP Guidelines explain that ‘the legitimate exercise of IP rights means exercising within the scope of the intellectual property rights granted under the relevant laws’. Even in cases where there may appear to be a legitimate exercise of IP rights in form, if in substance it goes beyond the intent of the IP system and against its fundamental purpose, then the MRFTA can be applied.
Review and investigation of competitive effects from exercise of IP rights
Which authorities may review or investigate the competitive effect of conduct related to exercise of IP rights?
The KFTC was established pursuant to article 35 of the MRFTA and is in charge of enforcing the MRFTA. The KFTC thus reviews or investigates the competitive effect of conduct related to the exercise of IP rights under the MRFTA.
The KFTC’s dispositions may be challenged by filing an objection or an administrative suit to the Seoul High Court, whose decision may then be appealed to the Supreme Court.
In addition, if an infringer raises the defence of an abuse of rights or violation of MRFTA in an infringement action brought by a IP right holder, the courts may review the competitive effect of the conduct related to the exercise of IP rights.
Competition-related remedies for private parties
Can a private party recover for competition-related damages caused by the exercise, licensing or transfer of IP rights?
A private party can claim damages against a business entity or business organisation under MRFTA article 56(1) for any damages sustained as a result of the business entity or organisation violating the MRFTA, except in the case where the business entity or organisation verifies that the violation was made neither intentionally nor negligently.
A private party may also claim damages under article 750 of the Civil Act, in which case the private party must prove intent or negligence by the business entity or business organisation. Under article 56(1) the MRFTA, the burden of proving that there was no intent or negligence is transferred to the business entity or business organisation.
Have the competition authorities, or any other authority, issued guidelines or other statements regarding the overlap of competition law and IP?
The KFTC issued the IP Guidelines as noted above on 30 August 2000.
The IP Guidelines apply to the exercise of IP rights, including patents, utility models, designs, trademarks and copyrights. Although the provisions of the IP Guidelines are centred on the exercise of patent rights, they can also be applied to other IP rights.
The IP Guidelines are also applicable to a foreign business entity which affects the domestic market through an agreement, resolution or other act performed domestically or internationally.
The IP Guidelines provide standards for reviewing an exercise of IP rights related to the following:
- acquiring IP rights (transfer, grant-back);
- enforcing IP rights through litigation;
- granting of licences to IP rights;
- IP rights pooling;
- exercise of standard technology IP rights;
- settlement agreements; and
- exercising IP rights of a Non-Practising Entity (NPE).
Exemptions from competition law
Are there aspects or uses of IP rights that are specifically exempt from the application of competition law?
The MRFTA, in principle, prohibits resale price maintenance (RPM) activities under article 29(1) and sets out in article 29(2) the requirements for RPM of copyrighted works. There is an exemption, however, applicable to published copyrighted works (including electronic publications) selected by the KFTC through consultation with the relevant central administrative agency.
Does your jurisdiction have a doctrine of, or akin to, ‘copyright exhaustion’ (EU) or ‘first sale’ (US)? If so, how does that doctrine interact with competition laws?
Article 20 of the Copyright Act contains a provision that limits the copyright holder’s right of distribution under the doctrine of ‘copyright exhaustion’ or ‘first sale’.
Article 9(2) of the Act on the Layout-Designs of Semiconductor Integrated Circuits and article 58 of the Act on the Protection of New Varieties of Plants are also interpreted as imposing the doctrine of exhaustion or first sale.
In addition, the doctrine of exhaustion or first sale applies even if there is no statutory provision.
The IP Guidelines explain that, where IP rights have been exhausted, an IP rights holder’s act of imposing a condition that restricts subsequent business activities (eg, by imposing conditions on the resale of goods) will be deemed to fall outside the scope of justifiable exercise of IP rights.
International exhaustion of trademark is seen to have been recognised when the Supreme Court ruled that parallel imports of authentic products did not infringe the trademark right (Supreme Court Decision No. 2002 Da 61965, 9 June 2005). In addition, the Notification of Unfair Trade Practices related to Parallel Imports released by the KFTC states that parallel imports of authentic products are permitted in principle, while unfair deterrence of parallel imports by trademark owners is prohibited.
With the exception of a lower court ruling that recognised international exhaustion of patent rights, however, there are no established precedents for patent rights, so it still remains unclear whether parallel import is permitted.
To what extent can an IP rights holder prevent ‘grey-market’ or unauthorised importation or distribution of its products?
According to the KTFC’s Notification of Unfair Trade Practices related to Parallel Imports, which applies to trademarks, (i) if the parallel imported goods are counterfeit goods, or (ii) if the parallel imported goods are trademarked goods with different specifications and quality, but there is concern that these goods will mislead the consumers to believe that the goods are the same goods as those supplied by an exclusive importer, owing to a false indication of source, etc, the trademark owner may take necessary measures to prohibit the parallel importer from using the trademark. Such actions will not constitute a violation of the MRFTA.
The following acts of a trademark owner will constitute unfair trade practices under article 23(1) of the MRFTA:
- preventing the purchase of genuine goods from an overseas distribution channel;
- placing restrictions on dealers in the handling of parallel imported goods;
- discriminating against dealers handling parallel imported goods;
- rejecting or discontinuing product supply from dealers handling parallel imported goods; and
- restricting the sale of exclusive imported goods by retailers handling parallel imported goods.
Jurisdictional interaction between competition laws and IP rights
Are there authorities with exclusive jurisdiction over IP-related or competition-related matters? For example, are there circumstances in which a competition claim might be transferred to an IP court to satisfy subject matter jurisdiction? Are there circumstances where the resolution of an IP dispute will be handled by a court of general jurisdiction?
Competition-related matters are investigated and reviewed by the KFTC, whose decision may be appealed to the High Court and the Supreme Court. In other words, if the KFTC undertakes an investigation regarding an alleged violation of the MRFTA and imposes a disciplinary measure, the party subject to the disciplinary measure may file a cancellation suit with the Seoul High Court. The Seoul High Court’s decision may also by appealed by either the subject party or the KFTC. These competition-related matters are not heard by the IP court even if they are related to IP rights (see questions 2 and 3).
Powers of competition authority
Does the competition authority have the same authority with respect to reviewing mergers involving IP rights as it does with respect to any other merger?
Yes, the KFTC has the same authority with respect to reviewing mergers involving IP rights as in other mergers. According to the KFTC’s IP Guidelines, article 7 of the MRFTA, which provides restrictions on business combination, similarly applies to mergers involving IP. The IP Guidelines also provide that article 7 of the MRFTA can apply to any transfer or acquisition of IP rights that are considered a material part of the business, or to any exclusive licence agreement that has the same effect as the transfer or acquisition of such IP rights.
Analysis of the competitive impact of a merger involving IP rights
Does the competition authority’s analysis of the competitive impact of a merger involving IP rights differ from a traditional analysis in which IP rights are not involved? If so, how?
No. The same standard for review applies regardless of whether or not the merger involves IP rights.
Challenge of a merger
In what circumstances might the competition authority challenge a merger involving the transfer or concentration of IP rights? Does this differ from the circumstances in which the competition authority might challenge a merger in which IP rights were not a focus?
The KFTC may challenge a merger involving the transfer or concentration of IP rights if such transfer or concentration has substantial anticompetitive effects. The standards governing mergers remain the same, regardless of whether such a transfer or concentration involves IP rights.
Remedies to address the competitive effects of mergers involving IP
What remedies are available to address competitive effects generated by a merger when those effects revolve around the transfer of IP rights?
The KFTC may first order the divestiture of IP rights or the assignment of a related business, but if such measures are unable to relieve the anticompetitive effects, the proposed merger could be suspended or nullified. A compulsory licence may also be imposed. The KFTC has previously imposed a remedy to enter into a licence agreement with specified content to a patent owner that had refused to grant a licence or had offered unfair licensing terms constituted an unfair trade practice.
Specific competition law violations
Can the exercise, licensing or transfer of IP rights create price-fixing or conspiracy liability?
Yes, the exercise, licensing or transfer of IP rights may create antitrust liabilities if it goes above and beyond the scope and terms of the IP rights. The Supreme Court has found that a settlement agreement that reaches beyond the protection afforded by IP rights may give rise to antitrust liability. The IP Guidelines also identify the following types of conduct as unfair conspiracy:
- unfairly determining, maintaining or altering the royalty rate in collaboration with other enterprises;
- refusing to grant a licence to certain enterprises without justifiable reason in collaboration with competing enterprises;
- entering into an agreement based on unfair transaction terms on trading volumes, territory and other terms while also limiting the scope of licence rights with respect to the relevant product or technology;
- unreasonably refusing to grant a licence to enterprises that are non-participants in the patent pool or concluding a licence agreement with such enterprises on discriminatory conditions;
- unreasonably pooling invalid or non-essential (substitute) patents;
- cross-licensing to exclude third-party competitors; and
- settling patent disputes for the purpose of delaying competitors from entering the market.
The Supreme Court has applied the ‘rule of reason’ standard in reviewing the exercise IP rights. According to the KFTC’s Guidelines for Review of Resale Price Maintenance (Resale Price Guidelines), however, forcing the other party or parties to the subsequent phases of transactions to comply with the lowest price is deemed unlawful.
Reverse payment patent settlements
How have the competition laws been applied to reverse payment patent settlements in your jurisdiction?
In 2011, the KFTC determined that a patent settlement agreement between two pharmaceutical companies violated the MRFTA. The agreement between the patent owner and a generic company provided that the generic company shall not sell the generic product or such similar products until well after the patent expired in exchange for the patent owner granting the generic company an exclusive distributorship for the original drug as well as other products that were outside the scope of the disputed patent. The patent owner also promised to pay the generic company sales incentives that far exceeded customary business practices.
The Supreme Court therefore held that the settlement constituted an unjustifiable exercise of patent rights in violation of the MRFTA. The Supreme Court emphasised that any anticompetitive effects of pharmaceutical patent settlements should be determined on a case-by-case basis, considering the totality of circumstances, including the facts leading up to the settlement, relevant time periods, commercial terms, and actual and expected legal costs of the underlying litigation, among others.
(Resale) price maintenance
Can the exercise, licensing or transfer of IP rights create liability under (resale) price maintenance statutes or case law?
The IP Guidelines provide that restricting the sale price or resale price of a product under a licence agreement without justifiable reason is a violation of antitrust law. Thus, the rule of reason standard applies. The IP Guidelines also state that the restriction on resale price maintenance also applies to IP rights. As mentioned in question 23, the Resale Price Guidelines consider any act that forces a transactional party or other parties to the downstream transactional phases to comply with the lowest price as unlawful. However, an exception can apply where there is a legitimate reason for maintaining the lowest price, such as promoting intra-brand competition and thereby increasing consumer welfare. Setting the highest price is unlawful if the highest price functions as a cartel price or if it has substantial anticompetitive effects. If the exercise, licensing or transfer of IP rights forces a party to maintain the lowest price or the highest price, the above guidelines may also apply to such exercise of IP rights.
Exclusive dealing, tying and leveraging
Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to exclusive dealing, tying and leveraging?
Under the IP Guidelines, if a licensor unfairly coerces the purchase of a product or technology that is not required for the production or use of the licensed product, such act is regarded as an act that is above and beyond the scope of an IP right. In 2016, the KFTC determined that Qualcomm’s requiring a mobile phone manufacturer to purchase modem chips as a condition to entering into a patent licensing agreement with Qualcomm constituted an abuse of its market dominance or an unfair trade practice and issued an order against Qualcomm, prohibiting such act.
Abuse of dominance
Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to monopolisation or abuse of dominance?
According to the IP Guidelines, if an entrepreneur in a dominant position refuses to grant a licence to use a standard essential patent, demands discriminatory licence terms or impose clearly excessive royalties etc, such acts may constitute an abuse of dominance if such acts restrict competition. In addition, the KFTC’s Review Guidelines for the Abuse of Market Dominant Position identify the following conducts by an entrepreneur in a dominant position as an abuse of market dominance: (i) causing difficulty in another entrepreneur’s business activity by unjustly using IP-related infringement litigation, invalidity action or other judicial or administrative procedures; and (ii) purchasing IP rights necessary for another entrepreneur’s continued business activities without a justifiable reason.
Refusal to deal and essential facilities
Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to refusal to deal and refusal to grant access to essential facilities?
The Enforcement Decree of the MRFTA expressly mentions as a type of abuse of dominance unfair refusal to allow the use of or access to an essential facility, or otherwise unfairly restricting such use or access. According to the KFTC’s Review Guidelines for the Abuse of Market Dominant Position, ‘essential facilities’ means tangible or intangible facilities or infrastructure satisfying the following requirements: (i) it is impossible to participate in a certain trade or an inferior market status is forced to be maintained because it is impossible to manufacture, supply or sell products or services without using such an element; (ii) a particular business exclusively owns or controls such an element; and (iii) it is legally or economically impossible for a party trying to use or access such an element to reproduce it or substitute it with something else.
The same review standards apply with respect to IP-related conduct. The KFTC’s IP Guidelines specify unfair refusal to grant a licence to standard essential patents as an example of acts constituting an MRFTA violation.
Remedies for violations of competition law involving IP
What sanctions or remedies can the competition authorities or courts impose for violations of competition law involving IP?
The KFTC may impose an administrative fine within the limit prescribed by statute and issue an order prohibiting the anticompetitive activity, depending on the type of competition law violation involved. In addition, the KFTC may issue corrective orders to address the resulting anticompetitive effect. If a party found to have violated restrictions related to business combination fails to comply with a corrective order, the KFTC may impose penalties of up to 0.03 per cent of the relevant transaction price for each day during which such failure continues.
Competition law remedies specific to IP
Do special remedies exist under your competition laws that are specific to IP matters?
Scrutiny of settlement agreements
How would a settlement agreement terminating an IP infringement dispute be scrutinised from a competition perspective? What are the key factors informing such an analysis?
As noted in question 24, the Supreme Court found a settlement agreement terminating a patent dispute can constitute an unfair collusion, and that any antitrust effects of pharmaceutical patent settlements should be determined on a case-by-case basis, considering the totality of circumstances, including the facts leading to the settlement, relevant time periods, economic terms and actual and expected legal costs in the underlying litigation, among others. Considering the Supreme Court decision, the following acts may constitute unlawful collusion: agreements to delay market entry until the patent is expired, asserting the patent right in a manner that exceeds the scope of the patent, maintaining a patent by entering into an agreement with a third party to withdraw a patent invalidation action to deter such third party’s market entry while knowing the patent is invalid etc.
Economics and application of competition law
What role has competition economics played in the application of competition law in cases involving IP rights?
Conduct related to IP rights may constitute a violation of competition law if such conduct has substantial anticompetitive effects. Economic analyses by experts are increasingly utilised as evidence of a restrictive effect on competition and consumer welfare. The KFTC has also begun to adopt an effects-based approach in determining whether to take enforcement actions, and increasing its use of economic analyses. The KFTC established the Regulations on the Submission of Economic Analysis Evidence in 2013 and published a guidebook entitled Understanding and Utilizing Economic Analysis in April 2017.
Recent cases and sanctions
Have there been any recent high-profile cases dealing with the intersection of competition law and IP rights?
In 2009, the KFTC determined that Qualcomm violated the MRFTA for having engaged in: (i) a royalty discount programme discriminating against export-model mobile phones using non-Qualcomm chips - where Qualcomm charged a 5.75 per cent royalty rate for these users while offering a discount of up to 5.0 per cent royalty rate for Qualcomm chip users; (ii) a royalty cap programme imposing a US$30 cap on non-Qualcomm chip users while imposing a US$20 cap on Qualcomm chip users; and (iii) a price-netting programme discriminating against domestic-model mobile phones using non-Qualcomm chips by providing for Qualcomm chip users only a deduction of the chip value from a phone price when accounting the royalty. The KFTC issued an order against Qualcomm prohibiting such licensing practices.
In 2016, the KFTC again found Qualcomm liable for abuse of its dominance by engaging in the following three conducts: refusing to license its standard essential patents (SEPs) to competitor chip suppliers or restricting those licences; refusing to sell its modem chips to handset companies that were not licensed to Qualcomm patents that cover those chips; and licensing together as a single patent portfolio its SEPs and non-SEPs without fairly negotiating the licensing terms and requiring free cross-licences to handset company patents. The KFTC imposed on Qualcomm a fine of 1,030 billion Korean won for the violations and ordered three corrective measures: (i) engaging in a licence negotiation that will result in an exhaustive licence agreement if requested by modem chipset manufacturers for a licence to Qualcomm’s SEPs; (ii) selling modem chips to handset companies even if they are not licensed to Qualcomm’s patents; and (iii) not coercing comprehensive licence conditions and free cross-licences etc.
Remedies and sanctions
What competition remedies or sanctions have been imposed in the IP context?
As explained in question 33, the KFTC has imposed administrative fines and issued a cease-and-desist order requiring a violator not to engage in the same violations. In addition, the KFTC has ordered the violator to engage in a licence negotiation that will result in an exhaustive licence.
Update and trends
Update and trends
Are there any emerging trends or hot topics in the law of IP and antitrust policy? Have changes occurred recently or are changes expected in the near future (through either legislation or court decisions) that will have an impact on the application of competition law to IP rights? (For example, has there been any development with regard to assessment of the appropriate basis for royalty determinations (eg, ‘smallest-saleable unit’ versus total cost of product?)