Licensee May Challenge Patent Validity in Korea

On October 27, 2017, the Korean Patent Court affirmed the IPTAB’ decision that a Licensee may challenge patent validity in Korea. The licensee filed a petition for patent Invalidity and the case was tried before the Patent Court. (Case No. 2017Heo27272 decision)

Typically, a licensee has been estoppel by the clause of licensee agreement that “the licensee under a patent license agreement could not challenge the validity of the licensed patent in a suit for royalties due under the contract.”

However, the Korean Fair Trade Commission (KFTC) made it clear that “Prohibiting licensees from challenging the validity of any patents and using transacting terms that permit termination of the licensing agreement if licensees challenge the validity of a patent” violated the Korean Faire Trade Law and ordered a patentee to correct such illegal licensee term.

Like Medimmune decision, it is possible for a licensee to challenge the validity of a licensed patent while still fulfilling its contractual duty under a license agreement by paying contractually required royalty fees.

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KFTC reviews Patent License Contracts related to Patent MA Linkage

Recently the Korean Fair Trade Commission (KFTC) requested pharmaceutical companies to submit information including patent license contracts and patent litigations or disputes. It was to scrutinise fair trade practices in pharmaceutical industry.

Korea has implemented the Patent Marketing Approval Linkage system over 2 years since March 15, 2015. There was a dramatic increase in the number of patent disputes filed between original drug manufacturers and generics.

KFTC will look into any changes in pharmaceutical companies' IP practices after the patent MA linkage system. Particularly KFTC will review any settlement agreements or other business arrangements that may have been entered into as a result of such IP disputes.

KFTC may further investigate specific companies based on the information and materials that have been submitted. On the other hand, if KFTC may conduct an ex parte raid on the responding company, in case KFTC decide it is necessary to investigate a particular suspicious case.

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Trade secret Infringement Lawsuit on Botulinum Toxin between Medytox and Daewoong Pharmaceuticals

Two Korean companies have disputed over trade secret theft about Botulinum Toxin for years. Medytox, in cooperation with its U.S. partner Allergan, has been conducting clinical trials in USA to get approval for its BTX product, Meditoxin.

Last year, Daewoong and its U.S. partner Alphaeon filed for FDA approval for its BTX product, Nabota in USA. Medytox will face competitions of Daewoong in the US market. 

Accordingly, Medytox filed a lawsuit in USA alleging Daewoong of stealing its strain of the Botulinum toxin. But the plaintiff could not succeed to block the competitor’s business in USA through the lawsuit because the lawsuit case was not successful.

On Oct. 12, 2017, the Superior Court of California in Orange County dismissed the case with ruling that the case should be settled in Korea. The court stated that "the court finds that Korea is an alternative suitable forum in which an action can be brought against all defendants."

Furthermore, the US court decided that "if it turns out that the alternative forum is not suitable after all, this court has the power to lift the stay and proceed with the action in the original forum, the court sets a status conference on a stayed matter for April 13, 2018."

According to their press release, Medytox will file a lawsuit against Daewoong in Korea soon.

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Statutory Damages for Trademark Infringement in Korea

Under the Korean Trademark Law, a trademark holder in a trademark infringement lawsuit may elect between actual damages and statutory damages. This election is to be made at any time before judgment is rendered.

 

Actual damages can be based on plaintiff’s lost profits, infringer’s profits or reasonable royalties. A trademark holder must prove the exact amount of actual damages by a preponderance of the evidence.

 

In practice, it is often difficult to prove the amount of damage for IP infringement. The statutory damage is designed to save rightsholders from such difficulties.

 

Under Article 111 of the Korean Trademark Act, a trademark owner may file a claim for statutory damages against a person who used a trademark identical to the trademark owner’s, either intentionally or by negligently, on goods identical to the designated goods.

The amount of statutory damages to be awarded by the court may not exceed KRW 50 million (approximately USD $45,000.).

 

Further, with statutory damages, the court also awards legal cost including attorney fees to the prevailing trademark owner.

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Statutory damages for copyright infringement in Korea

In principle, a copyright holder in a copyright infringement lawsuit may elect between actual damages and statutory damages. This election is to be made at any time before judgment is rendered.

Actual damages can be based on his own lost profits, defendant’s profits or reasonable royalties. A copyright holder must prove the exact amount of actual damages by a preponderance of the evidence.

In practice, it is often difficult to prove the amount of damage for IP infringement. The statutory damage is designed to save rightsholders from such difficulties.

Under Article 125-2 of Korean Copyright Act, a copyright holder may seek statutory damages if the copyright has been registered with the Copyright Commission. If the copyright is not registered, the copyright holder may only receive compensatory damages for actual damage.

The statutory damage is up to 10 million Korean Won (about US$ 9,000) per a copyrighted work. In case the infringement is willful and for the infringer’s commercial interest, the maximum of statutory damage is increased to 50 million Korean Won (about US$ 45,000) per a copyrighted work.

Further, with statutory damages, the court also award cost including attorney fees to the prevailing party.

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