Qualcomm v. KFTC case in Korea

Last year the Korea Fair Trade Commission (“KFTC”) imposed $865 Million sanctions against Qualcomm for abuse in licensing standard essential patents (“SEP”) in the mobile communications industry. In particular, KFTC released an English translation of the Attached is the press release of Qualcomm case.

1.      Facts

Qualcomm and its affiliates owns patents essential to mobile cellular technology standards (“SEPs”). Qualcomm holds over 90% of the SEPs on 2G CDMA technology, but had a smaller share of SEPs on later generations of the standard: 27% of the 3G WCDMA standard and 16% of the 4G LTE standard.

KFTC indicates that Qualcomm only offers a comprehensive license to its entire portfolio of cellular patents that includes both SEPs and non-SEPs. Qualcomm licenses its patents to handset companies regardless of whether they use Qualcomm mobile chips or a competitor’s mobile chips.

The license terms may include the handset company granting Qualcomm a cross-license to the handset company’s patents. Competing cellular modem chip suppliers have asked for a license to Qualcomm’s SEPs. But Qualcomm either refused to grant them a license or has entered limited, non-exhaustive licenses with restrictive terms that do not extend a license to handsets that use those chips (the handset companies must seek such license rights from Qualcomm).  The number of modem chip competitors has decreased.

2.     KFTC’s Position

KFTC asserted that Qualcomm participated in three specific areas of conduct that combined to form an unfair business model:

(1)    Qualcomm not licensing SEPs to competitor chip suppliers (or restricting those licenses)

(2)   Qualcomm not selling its modem chips to handset companies that are not licensed to Qualcomm patents that cover those chips.

(3)   Qualcomm licensing together as a single patent portfolio its SEPs and non-SEPs without fairly negotiating the licensing terms and requiring free cross-licenses to handset company patents

KFTC further indicated that patent holdup has occurred based on three licensing terms:

(1)    Qualcomm licensing only the entire portfolio of SEPs and non-SEPs, so handset companies wanting only licenses to SEPs also must license unnecessary patents.

(2)   Qualcomm has kept the same licensing rate over long term licenses even though Qualcomm’s contribution of SEPs declined over each new generation of the cellular standard.

(3)   Qualcomm obtained free cross-licenses to handset company patents.

KFTC also pointed out that handset companies lost incentive to invest in research and development (“R&D”), because any cellular SEPs they obtained would be cross-licensed to Qualcomm for free. Qualcomm collects a significant portion of any increased value-added created by those companies’ innovation efforts.

 

The Korea Copyright Commission (KCC)

The Korea Copyright Commission (“KCC”) is the national agency dedicated to copyright-related affairs. It plays a pivotal role in promotion of the legitimate use of works, and development of the copyright industry.

 

The KCC covers its roles ranging from deliberating copyright-related issues, mediating copyright disputes, researching policies and legislations on copyright, providing copyright education and public awareness programs, to serving as a copyright registration agency.

 

Authors may register their copyrighted works in the Copyright Commission. Further, the Copyright Commission provides ADR solutions regarding copyright disputes in Korea. The Copyright Commission employs conciliation for a settlement of copyright disputes. The Copyright Dispute Conciliation system is meant to efficiently resolve problems through the Copyright Commission established under the Copyright Act, with respect to disputes over rights protected by the Act. One can apply for conciliation for a small fee and the Commission shall reach conciliation within three months from the date of the application.

 

Confidentiality is assured in conciliation. Conciliation has binding effect to both parties as a judicial settlement. Under the Supreme Court Regulation, when a party does not follows the contents of the settlement, the counter party may enforce his rights through direct execution based the conciliation without bringing a separate lawsuit.

 

When any one creates a computer program, he can deposit a copy of a source code or object code of the program to register his program in the Committee. The deposit and registration will serve to clarify the priority to the later developers and the contents of the work. Further, the Committee provides ADR solutions in legal disputes regarding computer programs through mediation and conciliation. A mediation and conciliation board is consists of a panel 3 computer program specialists from legal, academic and industrial area. When both parties accept mediation, the mediation is binding and has identical effect to the judgment of a court.

 

Registration of Copyright Work at KCC in Korea

1. Obtaining of Legal Presumption

A person whose real name is registered as the author of a registered work shall be presumed as the author of the work.

A work for which its date of creation or the initial date of disclosure is registered shall be presumed to have been created or made public on the registered date. However, if a work is registered more than one year after its creation, it shall not be presumed to have been created on the date registered. In addition, when a registered work is infringed upon, it shall be presumed that the infringement has occurred due to negligence at least.

2. Priority of Rights between Conflicting Parties

In case a party is assigned with economic rights or the right to publication is established and these rights are registered, the registered assignee or the registered owner of the publication rights shall prevail over the duplicate assignee or the duplicate publication right holder.

3. Procedures

4 steps for Copyright registration: preparation, submission of application, examine and request complement, approve and issue a certificate of registration.

 

 

(1) Preparation - identifying the subject, the type of registration and the applicant’s eligibility before processing the application.

It is required to claim one registration for single work and category by the principle for registration, “one registration for one work” Additionally, only an obligee or obligor of registration can apply.

(2) Submission of Application

An applicant may submit the application, required documents, deposit copies of your work and registration fee electronically.

(3) Examine and Request for amendment

Copyright office examine the application submitted for registration whether it qualifies all the requirements. It will be requested to submit amendments if it does not.

(4) Approve and Issue a certificate of registration

When application is qualified, registration is approved and a certificate of registration is issued.

 

Appraisal and Expert Opinion by the Korean Copyright Commission

Appraisal system of KCC provides expert opinion on possible copyright infringement to help settle disputes over the use of copyrighted works such as writings, literature or computer programs.

For example, courts in infringement lawsuits may request KCC to provide expert opinions regarding similarity between source codes. The expert opinion may be an important basis for judges to decide the case.

 

 

 

Pfizer Prevailed in Pregabalin Lyrica® Patent Infringement Lawsuit in Korea

Based on Pfizer’s Lyrica patent, Korean courts granted preliminary injunctions for patent infringement against two Korean pharmaceutical companies in 2015.

 

Furthermore, in June 2017, the Seoul Central District court awarded Pfizer damage compensations for pregabalin patent infringement. However, the Korean Court did not grant injunction against Korean companies who sell generic products with off-labels.

 

The active ingredient of Lyrica is pregabalin that is a known chemical compound and a derivative of GABA (gamma-aminobutyirc acid). Further, the pharmacological effect of pregabalin is known as a depressive neurotransmitter and has been sold as an anti-convulgent drug for a long time. Pfizer discovered a new medicinal use of pregabalin. The subject Korean Patent No. 491282 is directed to a new use of pregabalin for treating pain. It is a second use invention that is one of the main indications of Lyrica.

 

Korean companies challenged validity of the subject patent on the ground that the new use of pregabalin for treating pain can be anticipated or is obvious over the prior art. They alleged that the pain killing effect might be in the scope of anticipation of an ordinary skilled person because the prior art discloses the compound and its neurotransmitter depressing effect. Also, the blocking of certain neurotransmitter flow may be correlated with anti-pain effect. The IPT of KIPO and the Patent Court, the Supreme Court, however, maintained the patent by rejecting non-obviousness challenge.

 

After validity challenge was failed, Korean generic companies restricted indications of their label only to anti-convulgent. They carved out pain killing use from their labels.

 

The patentee argued that the change of label is not enough to avoid patent infringement liability because the sale of generic drugs has slightly dropped or never changed even after the carved-out pain treatment indication from the labels. Accordingly, the generic companies shall be liable for the patent infringement of their continued sale after the label change.

 

The Seoul Central District Court did not agree with the patentee’s argument. The court held that the patent is directed to a second use invention and without indication of the claimed use, there is no patent infringement.

 

The Seoul Central District Court only awarded the patentee damage compensation based on the sale before the label change – carved-out claimed indication from the generic’s labels. Pfizer appealed to the Patent Court and the off-label case of pregabalin is still pending.