POSCO v. Nippon Steel re: Patent Disputes and Invalidity Proceedings in Korea

In 2012, Nippon Steel & Sumitomo Metal (NSSMC) sued POSCO at the Tokyo District Court alleging patent infringements on technology for grain oriented (GO) electrical steel sheets of NSSMC. In the complaint, Nippon Steel also alleged that POSCO infringed trade secrets about GO electrical steel sheets of NSSMC.

Nippon Steel seeks 100 billion yen (approx. US$1 billion) compensation for damages and injunction against manufacture and sale of POSCO’s GO electrical steel sheets. The lawsuit is still pending in the first instance stage.

On the other hand, Nippon Steel filed another complaint to the State Court of New Jersey in April, 2012, too. This case is still pending, too.

Responding the patent infringement lawsuits, POSCO filed invalidity trials challenging validity of 4 patents of Nippon Steel at the Korean Patent Office (IPT of KIPO). Last week, the IPT of KIPO rendered the decision that all claims of one basic patent among the challenged 4 patents should be invalid because those are obvious over the prior art.

Upon receiving the losing decision, Nippon Steel announced by press release that they will immediately appeal the invalidity decision by the IPT of KIPO to the Patent Court.

Arbitration Procedures in Korea at KCAB

1. Arbitration Agreement

Parties may file a Request for Arbitration where the contract in dispute contains an effective arbitration agreement or when the parties agree in writing to resolve their disputes by arbitration. Where a case is “international” (i.e., where one party has its place of business outside of Korea or the place of arbitration is outside Korea), the International Arbitration Rules will apply by default, unless the parties agree otherwise.

2. Request for Arbitration (payment of filing fee and advance of costs)

Claimant shall pay a fixed filing fee when submitting its Request for Arbitration. Upon receiving the Request, the Secretariat notifies Respondent, who has 30 days to submit an Answer. The Secretariat will provide a pre-estimate of the arbitration expenses (including administrative and arbitrator fees) which the parties shall pay in equal shares prior to the commencement of proceedings. This advance will be re-calculated once proceedings are brought to a close.

3. Submission of Answer (Filing Counterclaims)

When submitting the Answer, Respondent may also file a Counterclaim, which may be consolidated with the existing claim and the amount in dispute shall be the sum of both claims. The Respondent will be charged a separate filing fee for its Counterclaim. If the Respondent disputes the jurisdiction of an arbitral tribunal or otherwise believes there is no basis upon which the arbitration may be conducted, they may make this submission in the Answer.

4. Arbitral Tribunal

In principle, the disputes under the International Rules shall be decided by a sole arbitrator chosen by the parties, unless the parties agree otherwise. When asked by the parties, the Secretariat shall provide a list of arbitrators with the necessary expertise and impartiality. If the parties are unable or unwilling to appoint an arbitrator, the Secretariat will make the appointment on their behalf. To this end, the KCAB may consult the International Arbitration Committee (IAC), which will assist in the appointment of a tribunal. In the event of a challenge by one party to the appointment of an arbitrator, the Secretariat will decide on the challenge, having first consulted the IAC.

5. Oral Hearing

The Tribunal is fully in charge of hearings. Unless and until the Tribunal directs otherwise, all communications, written or verbal, shall take place directly between parties or between each party and the Tribunal.

6. Delivery of an Award

Once hearings have concluded, an Award is rendered by the tribunal. When all outstanding arbitration expenses have been paid, the Secretariat shall deliver the Award to the parties.

7. Enforcement of an Award

An Award rendered by the Tribunal is binding upon the parties. The Secretariat shall deliver to the competent court the Award and a copy of the document proving that the Award has been delivered to the parties. Parties may obtain a writ of execution based on the arbitration Award either in a Korean Court or abroad.

Arbitration in Korea at KCAB (The Korean Commercial Arbitration Board)

Usually, many license agreements have arbitration clauses. Accordingly IP lawyers have to handle arbitration issues inevitably and we have been assisted and represented our clients regarding arbitration matters.

KCAB (The Korean Commercial Arbitration Board) was established in 1970 and had been duly approved as an official arbitration institution in the Republic of Korea. As international trade and commerce increases, disputes have been arising. In case parties decided to use arbitration, KCAB has been frequently chosen to resolve disputes.

There are two kind of dispute resolution systems ensuring enforceability of their decisions; judicial and arbitration proceedings. Due to its strict confidentiality, arbitration is not as well known while it has been used as typical ADR process.

Arbitration only handles such disputes related to contracts with arbitration agreement in it or a separate written agreement. For KCAB, a model Arbitration Clause must be included in contracts as follows: “All disputes, controversies, or difficulties, or differences which may arise between the parties out of, in relation to, or in connection with this contract, or for the breach thereof, shall be finally settled by arbitration in accordance with the Arbitration Rules of the Korean Commercial Arbitration Board and under the Laws of Korea.”

KCAB has developed rules and practice to meet users’ high and various demands and then would become a new arbitration hub in northeast Asia. KCAB recognizes the paramount need to be neutral, independent and internationally minded administrator in order to deliver the most reliable, efficient and world class dispute resolution services.

Usually litigation in foreign country can be costly, time-consuming. KCAB arbitration can provide fast, impartial and confidential resolution of business disputes, and sometimes cheap compared to litigation.

Korea is a signatory state of the U. N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) since 1973. Also KCAB has signed around 50 international cooperation agreements with similar arbitral organizations throughout the world.

Filing a Divisional Application to Broaden Scope of Claim

Under the Korean patent law, it is not allowed to file a continuation application. Furthermore, after a notice of grant has been issued, it is not available to amend claims, and an applicant is only able to correct typo errors or to narrow claim scope. Any extension of the scope of protection by amendment after grant is not allowed.

The scope of a claim must be narrow enough to be novel and non-obvious over the prior arts. On the other hand, however, claims should be infringed by the competitor’s products, services or processes and thus the scope of claims must be broad enough to cover competitor’s product or process. Even after grant, an applicant may want to have a chance to change the scope of protection.

A divisional application can play a key role for this purpose because an applicant may prepare a new set of claims having broader scope of protection than those of original application. A divisional application can be tricky. It must be differentiated from the original application in the scope of claims. But the same specification can be used for a divisional application. And more than one divisional application can be filed based on an original application.

Substantive examination of a divisional application must be requested with fee for further prosecution. Request for the examination of divisional application may be filed within five years from a filing date of an original application.

In conclusion, therefore, through filing divisional applications, applicants can strategically obtain additional patents for broader scope of protection than those of a parent patent application; or build a patent portfolio, which means more proper and various forms of claims that can be designed to cover competitors’ products, services, or processes after monitoring them for 5 years at maximum.

Apple v. Samsung re: antitrust issues on SEPs in Korea Fair Trade Commission

Apple filed a complaint against Samsung to the Korea Fair Trade Commission (KFTC) which is the South Korea’s antitrust authority on April 3, 2012 alleging that Samsung abused standard-essential patents (SEPs). Apple asserted that Samsung’s lawsuit to seek injunction based on standard-essential patents during ongoing negotiations between two parties violated the Korean Antitrust Law. In particular, Apple contended in their complaint that Samsung misused SEPs for 3G wireless technology to gain an unfair advantage over the competition because these SEPs were supposed to be licensed under fair, reasonable and non-discriminatory (FRAND) terms to Apple.

On February 25, 2014, however, KFTC rejected Apple’s complaint. KFTC pointed out that Apple was first to file a patent lawsuit against Samsung and was responsible for following litigations in some aspects; and that Samsung tried to resolve disputes with the standard-essential patents based on the FRAND licensing terms. KFTC concluded that Samsung's lawsuit was a legitimate act to protect its patent rights.