Litigation Agent Lacks the Standing to Sue for Infringement Lawsuit in Korea

Like SPH decision in USA, the same or similar rule is applicable in Korea too. Under Korean law, a licensee lacks the standing to bring an infringement lawsuit in case the licensee is just a litigation agent rather than a real licensee. Because the SPH decision of an American court is interesting to license practitioners, the points are summarized as follows:

1.      Facts

The patentee is a national research institute, Electronics and Telecommunications Research Institute (“ETRI”) and granted an exclusive patent license to SPH, a Korean-based entity. SPH then transferred to SPH America, LLC (“SPH America”) rights under the license to use the licensed patents, grant sublicenses to third parties, and to bring infringement actions.

SPH America sued Huawei in USA but the American court dismissed the case, finding that SPH America does not have standing to sue for infringement of the patents.

Under the agreements, the title to the patents remained with ETRI, and SPH America was required to receive the consent of ETRI before transferring any of its rights or obligations. The license agreement also required SPH America to use its best efforts to make licensing and litigation decisions that were in the best interest of ETRI, though SPH was responsible for all litigation costs. Large guaranteed minimum payments were required yearly if the proceeds from royalties and litigation proceeds did not meet the minimums. And all the license rights were to revert to ETRI if SPH America breached the contract.

2.      Court Decision in USA

The American court found that the license agreement create was a relationship where SPH America was an agent of ETRI for licensing and litigation in USA. The agreement did not transfer substantial ownership of the patents to SPH America.

Furth ETRI’s management of the negotiation without any direction or input from SPH America with Samsung also showed that SPH America did not actually have substantial rights in the patents.

The court found that despite the labels used in the agreement, SPH America was not an exclusive licensee, but merely ETRI’s agent to enter into licenses and litigate on its behalf. This “hunting license,” did not grant SPH America a proprietary interest or exclusive license in the patents.

3.      Comments on Practical Point

The same or similar rule explained in the SPH decision of an American court shall be applicable in Korea, too. Despite of a license agreement, in case the licensee is regarded as a litigation agent rather than a real licensee, the licensee lacks the standing to bring an infringement lawsuit in Korea.

 

 

Patent Court’s Oral Hearing in English in Korea

Posting in English Link: Patent Court’s Oral Hearing in English

The Patent Court of Korea held a test trial of an International Chamber case hearing adjudicated in English. According to the Patent Court, the demand for English-language trials has been repeatedly raised by international parties. More than 40 percent of the 611 cases in 2016 are international parties involved.

The test trial is “3M Innovative Properties Company v. KIPO.” According to the Patent Court, it was not too different from an ordinary hearing, oral arguments for the case were given in English by attorneys representing the plaintiffs and KIPO.

 

Enforcement of a Foreign Court’ Judgment in Korea

In principle, it is possible to enforce a foreign court’s judgment against a Korean individual or a Korean company within Korea. In order to enforce a foreign court’s judgment in Korea, a party must obtain a new judgment for recognition of a foreign judgment and enforcement judgment from a Korean court.

Under Article 217, Korean Civil Procedure Act, it is required to meet the following conditions for obtaining the recognition of a foreign judgment and its enforcement judgment:

1.       The foreign court’s judgment is final and conclusive.

2.      The foreign court has jurisdiction under the principles of international jurisdiction under Korean law or treaties.

3.      The defendant was properly served with the complaint or summons in advance, to allow sufficient time for preparation of his or her defense, or the defendant responded to the suit without having been served.

4.      The foreign judgment is not contrary to Korean public policy.

5.      The countries shall allow a guarantee of reciprocity.

 

 

Basics of the Statute of Limitation in Korea

In General, for civil claims such as breach of contract, the statute of limitation is ten years. The statute of limitation starts from the event date. However, claims based on ownership are not subject to any statute of limitation.

Tort claims must either be brought, whichever is earlier, within ten (10) years from the date the tort was committed, and within three (3) years from the date the claimant became aware of the damage and the identity of the tortfeasor.

Claims based on special statutes are subject to the specific time bars specified in the statutes. These statutes of limitations are often set for shorter periods.

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.