The Korean Supreme Court sided with Canon in Patent Infringement Lawsuits

Canon brought many legal actions against several Korean companies. Recently the Korean Supreme Court affirmed lower court decisions for the patentee Canon in printer cartridges patents. In other hand, accused infringers challenged validities of Canon’s patents but the Korean Supreme Court affirmed validity of challenged claims, too. Canon has successfully enforced his patent against local competitors.

As for damages, the Seoul Central District awarded Canon about US$14 million to an infringer company among several other infringers. The court used an interesting method to calculate the amount of Canon's damage. The patentee used an official statistic number of the government; the tax authority of the Korean government published an official data regarding an average profit ratio per each business area every year.

According to the official notices, average profits for periods of infringements were 10% for computer printer fields. Under the Korean patent law, courts have discretion to determine a moderate amount of damage to prevent non-compensation to a patentee even though the infringement is found but no sufficient evidence to prove an amount of damage exists. It eases the patentee’s burden of proof. Based on the provision, the district court computed damage of Canon’s patent infringement through the total sales of infringement x 10%. The total amount of US$14 million is a quite big number in the history of patent infringement litigation in Korea.

New Supreme Court Decision on Doctrine of Equivalents in Korea

The rationales of the doctrine of equivalents in Korea are basically similar to those of the U.S. Namely, when an accused product or process performs substantially the same function in substantially the same way to obtain the substantially same result of the patented invention, the accused product or process infringes the patent right.

In particular, the Korean Supreme Court held that the accused product or process infringes a patent where an element of the patented invention is substituted with another element and, if (i) the technical concepts or principle to solve the objective of the patented invention and the accused invention are the same or common; (ii) the substituted element in the accused invention performs substantially the same function in substantially the same way to obtain the substantially same result of the patented invention; (iii) such substitution is obvious to an ordinarily skilled person in the art. However, the doctrine of equivalents shall not be applicable to the circumstances that (iv) the accused substitution was already known to skilled persons in the art at the time of filing an application and (v) the accused element was excluded from the claimed invention during prosecution.

On July 24, 2014, the Supreme Court further clarified the scope and meaning of the above (1) requirement of DOE; the technical concepts or principle to solve the objective of the patented invention and the accused invention must be the same or common.

The patent claimed a cutter for dry seaweed. The seaweed cutter has cutting blades laid out in a grid pattern. Seaweed is placed on top of the cutting blades and pressed from top to down and then sliding down into a container through a grid-patterned box attached to the bottom of the cutting blades. The patented invention can achieve a cutting and storing of seaweed in a single process.

The accused cutter is different from the patented cutter in which the accused cutter has moving blades that move from top to down and cut seaweed. Instead, the patented invention does not have moving blades. Except the position of blades, other technical features of the two devices are the same. Two cutters perform the same function in the substantially same way and achieve the same result.

However, the Seoul High Court denied patent infringement under DOE because the accused cutter did not meet the (1) requirement of DOE. The accused cutter cut seaweed in a different way from the patent technology; there is no the same technical principle of resolving the technical problem.

The Supreme Court vacated the lower court decision. The Court held that the "essence or core of the technical idea" must be determined between two cutters in order to apply DOE and then found that two cutters used the same technical idea because it should be the incline of the grid patterned box that allowed seaweed to be automatically stored after being cut and it is found in two cutters although two cutters employed different embodiments. The Court found that the change to position of the cutting blades was obvious. The Supreme Court decision clarified (1) requirements of DOE under the Korean patent law. In practice, patentees may have higher chance to apply DOE under the recent decision.

Reverse Payment Agreement violates Antitrust Law in Korea: the First case decision by the Korean Supreme Court for GSK v. KFTC case on Feb. 27, 2014

1. Background

GSK owned a Korean patent for ondansetron, antiemetic drug and sold with a tradename as Zofran. Dong-A Pharmaceutical Co. developed a generic version of ondansetron and received a cease and demand letter from GSK. Both parties started lawsuits but soon signed a settlement agreement and withdrew lawsuits.

2. Settlement of Patent Infringement Litigations

By a Sale & Supply Agreement for ondansetron between both parties, GSK granted Dong-A to sell the product to large sized hospitals. Instead, Dong-A shall neither make nor sell any competing medications including ondansetron to Zofran. GSK agreed to pay large amount of money to Dong-A by cash every year for 5 years. Further GSK promised to offer additional significant amount as incentive for high sales performance.

3. KFTC investigation and lawsuits

KFTC investigated GSK/Dong-A patent settlement case and decided that the settlement was a reverse payment agreement that violated the Antitrust Act of Korea. In particular, KFTC found them violating Art. 19 of the Monopoly Regulation and Fair Trade Act (MRFTA) and fined GSK about US$2 million and Dong-A US$1.5 million.

4. The Supreme Court Decision

GSK raised an appeal to KFTC's decision to the Seoul High Court but the court confirmed the KFTC decision. And GSK further appealed the case to the Supreme Court.

GSK argued that the settlement was within the scope of his patent right. As they pointed out, Art.59 of MRFTA (Korean version of antitrust law) has provision that “This Act shall not apply to any act which is deemed as a justifiable exercise of the right under the Copyright Act, the Patent Act, the Utility Model Act, the Design Protection Act or the Trademark Act.”

However, the Supreme Court rejected GSK's argument. The court opined that a settlement with reverse payment violates antitrust law if a patentee may maintain his monopoly by the reverse payment and thus affects adverse effect on fair and free competition in the related market. In the decision, the court suggested several factors in finding any violation or liability. Those can include the amounts of reverse payment to the opposing party and anticipated profit of the patent owner, patent litigation cost, time span and period for non-compete, etc.

On the other hand, the Seoul High Court stated in their decision that when the subject patent is obviously invalid or the competing party has not infringed the patent, any settlement with reverse payment shall be regarded as being anticompetitive and shall be violation of antitrust law.

Korea is scheduled to implement the patent and drug MA linkage system that is a Korean version of the Hatch-Waxman Act system from March 15, 2015. Under the new system, the first generic company may obtain 12-month market exclusivity. Such exclusivity may cause motives or incentives for reverse payments between the patent owner and the first generic. In order to avoid antitrust violation issue, accordingly, it is recommendable to closely review the first decision of the Supreme Court on the reverse payment case.

Pfizer v. Hanmi re: Infringement Litigation on Viagra Trademark for Diamond Shape and Blue Color in Korea

Pfizer’s blockbuster drug, Viagra tablet has known worldwide for its blue color and diamond shape. Right after expiry of a compound patent in Korea, many Korean companies launched generic versions of Viagra in local market. Among them, in particular, Hanmi Pharmaceutical decided to adopt their product’s shape and color as similar as possible to the original drug Viagra. As a result, Hanmi’s generic pill has almost a carbon-copy design with blue color and diamond shape with round edges. Through such a good price and clever marketing strategy, Hanmi could take nearly half the market in about 5 months after Pfizer's patent lapsed.

As an anticipated course, Pfizer filed a trademark infringement lawsuit against Hanmi but lost the first instance case. Pfizer appealed to the Seoul High Court and won the second instance case. Hanmi appealed the case to the Supreme Court late last year.

Pfizer obtained a trademark registration for Viagra’s diamond shape with blue color on February 17, 2005. (Korean TM Reg. No. 608,773) Hanmi contended that any diamond shape and blue color for drug tablets is common or conventional and thus does not have distinctiveness. Also Hanmi’s products have their own Trademark on the surface of tablet and on their package. The package is totally different from Viagra’s.

Hanmi argued that there is no likelihood of confusion between Viagra and Hanmi’s generic drug because (1) two products have their own TMs respectively on product itself as well as its package; (2) the subject drug must be distributed through doctor’s careful prescription and pharmacist’s delivery; (3) Hanmi used the diamond shape and blue color as design elements for drug tablets; and (4) such a diamond shape with blue color has been applied to drug tablets conventionally.

The Seoul Central District Court agreed with Hanmi’s arguments. However, on October 17, 2013, the Seoul High Court reversed the lower court’s decision and held that Hanmi infringed Viagra’s registered TM in diamond shape and blue color. The High Court held that the diamond shape with blue color had become a famous TM and there is likelihood of confusion about source of products having the same shape and color even though they have further TM on their surfaces and packages.

Hanmi appealed the decision to the Supreme Court. The case is pending. Pfizer has not brought the second lawsuit for damage compensation yet.

Appeal Procedure

Appeal to High Court

The losing party may appeal the district court decision to a high court (a court of appeal). A notice of appeal must be filed within 14 days of the receipt date of the court decision. The appeal period cannot be extended. When a notice of appeal is filed, the district court will send all documents to the court of appeal, which dockets and schedules the case. Then, the court of appeal orders the appellant to submit an appeal brief.

There is no limit on grounds of appeal. The court of appeal will review the case on de novo basis including factual errors and legal errors. An appellee will submit an opposing brief to an appeal brief. Both parties may submit new arguments and new exhibits during the appeal procedure. After exchanging briefs, the court set oral hearings. Usually it takes less than 1 year to a judgment in an appeal court.

Final Appeal to the Supreme Court

The losing party in an appeal proceeding may appeal the decision of the appeal court to the Supreme Court. The notice of re-appeal to the Supreme Court must be filed with the appeal court within 14 days from the receipt date of the high court decision, which is not extendible. Again, the court of appeal will send the documents of the case to the Supreme Court.

The court dockets the case and order the petitioner to submit a final appeal brief within 20 days from the receiving date of the court order. The period cannot be extended and the case will be dismissed if the final brief has not been filed within the period. The opposing party will be served the final brief the Supreme Court, and then can submit a rebuttal brief within 10 days of the date of the service. Exempting extraordinary circumstances, there is no oral hearing in the Supreme Court.

After briefs, the Supreme Court will review the final brief of the petitioner and the opposing brief of the respondent, and will decide whether the case will be fully reviewed by a panel of 3 or 4 justices.

The Supreme Court reviews only matters of law and therefore a matter of fact cannot be appealed to the Supreme Court. In case the appeal is based on factual errors of the low courts, the case will be dismissed within 4 months. Even though the appeal is directed to legal errors of the low courts, due to the excessive number of appeals to the Supreme Court, the Supreme Court can dismiss the appeals if the decision follows the statutes and precedents. It is called a refusal of further consideration in the Supreme Court.

The Supreme Court has given deference to the decisions of the Patent Court, and the Korean patent court plays the final decision maker as a matter of practice like the CAFC in the U.S.