Basics on Preliminary Injunction Lawsuits in Korea

Preliminary actions to preserve rights are designed to either temporarily preserve the current state or to form a preliminary state. The purpose of the preliminary actions is to avoid undue losses until the final decision is reached or executed.

A party who seeks a preliminary injunction must prove that the party is the owner of the right and that there is an urgent necessity to preserve the right. For the case involving a preliminary injunction of IP infringement, the right to be preserved is easily recognized provided that the IP right is valid and that it was infringed. However, there are several obstacles in recognizing the necessity to preserve the right. For example, even if there is evidence of infringement, if the foreign patent owner has not practiced his patent in Korea, the necessity for preliminary injunction will be a subject of debate. This issue is important when it comes to a preliminary injunction of IP infringement.

1. The Urgent Necessity to Preserve a Right

In most cases, preliminary injunction against IP users usually endows IP owners with a satisfactory remedy before the main suit, while it may afflict the other party rather severely. Therefore, courts should carefully consider all aspects regarding the necessity to preserve the right immediately. Furthermore, a higher standard of proof is required to prove the necessity because a preliminary injunction in IP infringement action may come to the same satisfaction as the main lawsuit.

When determining the necessity to preserve a right, the validity of the right and the anticipated outcome of the main suit are important factors. Since validity is a prerequisite, courts often face difficulties in recognizing the necessity to preserve the right immediately if there is a probability of invalidating the patent.

In sum, courts must give a consideration of balances between all interests of parties and anticipate a possible outcome of the main suit. And courts will recognize the necessity to preserve a right if the damage caused by IP infringement is not expected to be fully compensated with only the main lawsuit. Preliminary injunctions are not granted when the right holder’s damage is small compared to the infringer’s damage. For example, the necessity to preserve is more readily accepted if the right holder invests a large amount of money in R&D, or if the technology related to IP is developing rapidly and instigating fierce competition between the parties. The infringer’s intent or negligence is certainly an important factor here as well.

Meanwhile, if the right holder remains indifferent and does not take measures for a considerable period of time despite his awareness of the infringement, it will be difficult to persuade the need to preserve the right. And even more so if the right holder is a foreign national who has not exercised his IP right in Korea.

2. Oral Hearing

Preliminary Injunction Action to IP infringement is handled by a panel of three judges. In general, the right holder has to file a suit with the court that has jurisdiction over infringer’s residence. The court must give a chance for oral hearing in the case of preliminary injunction of IP infringement. As a standard of proof, it requires lower burden of proof than the main civil suit; i.e., it is enough for parties to prove to the extent that the judge may guess it would be certain. Evidence for preliminary actions should be confined within the scope where they can be examined by the court immediately. For example, they can be in the form of documents, samples or witnesses that are readily available for examination at the court. However, for a patent infringement case, courts will usually allow parties to submit experts’ testimonies and presentation of technical matters.

3. IP Owner’s Liability

The party that wins the preliminary action but loses the main suit is liable for the other party’s damages inflicted by exercising the right. The Supreme Court also applies this legal principle to IP cases.^[1] Therefore, even if the patentee wins the preliminary action of a patent infringement and/or obtains an expert opinion from a patent attorney or other expert stating that the other party’s act constituted an infringement, the patentee must be liable for the other party’s damage inflicted by exercising the patent right if he loses the main suit.

Furthermore, according to the Supreme Court, an IP owner is liable for compensating other party’s damage if the right holder loses the main suit, if the other party had suffered losses from the cancellation of a contract with his buyer and if the lost was caused by IP owner’s warning to the buyer for criminal liability. In other words, it makes no difference whether or not the IP owner obtains a favorable expert opinion from the Korean Patent Attorney Association (KPAA) before his warning.

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[1] Supreme Court case No. 79Da2138, rendered Feb. 26, 1980. In this decision, the Supreme Court ruled that there is no reason to differentiate IP cases from other cases.

Benefits on Utility Model Applications in Korea: Valuable addition

In addition to patents, a further form of IP protection in Korea is a utility model registration. A UM is called as a petit invention that does not have the same level of inventive step as patentable inventions.

In general a UM provides the same remedies for infringement such as injunction, damage compensation, criminal sanction, etc. But the duration of a UM protection is 10 years from the filing date. So UM is intended to the invention that needs protection in shorter time frame than can be obtained by patents.

In several jurisdiction, a UM can be obtained without substantive examination on novelty and inventive step for IPR. However, in Korea a UM must be registered to be IPR through substantial examination of novelty and inventive steps.

The key benefit of a UM lies in the lower level of inventive step. A UM can often be obtained for innovations that are only different to know technology. For example, an invention can be a UM while it may not necessarily meet the criteria for patentability. That means the standard for inventive step (non-obviousness) is often much lowered.

As for official fees and attorney fees, the UM protection is less expensive than the protection provided by patents. However, the protection period of 10 years is much shorter than 20 years of a patent. Therefore, an applicant should apply for a utility model in case the life cycle of the invention is short.

In sum, a UM is quick, cheap and easy to obtain than a patent. But a UM provides the same remedy for infringement as a patent such as injunction and damage compensation. Accordingly a UM can provides cost effective form of IP protection than patent in Korea.

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.