Legislative and administrative measures to strengthen the protection of IP rights in Korea
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Legislative and administrative measures to strengthen the protection of IP rights in Korea

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Hokyun Cho of FirstLaw PC summarises the recent steps taken towards the reinforcement of IP rights in South Korea, including the introduction of punitive damages and an expansion of the Special Judicial Police’s powers

In an effort to enhance the practical and effective protection of intellectual property (IP) rights in Korea, there have been a series of legislative amendments and administrative improvements in recent years. The following summary provides an overview of these measures.

Introduction of punitive damages and expanded damages exceeding patentee’s production capacity

Punitive damages for patent infringement, which became effective as of July 2019, is one of the most significant changes to the Korean IP system in recent years. The newly available punitive damages provision of the Korean Patent Act (KPA) allows treble damages for intentional or wilful patent infringement. When assessing the amount of such punitive damages, courts are to consider various factors, such as:

  • The infringer's dominant market position;

  • The infringer’s knowledge of harm caused;

  • The significance of any such damages;

  • The infringer’s economic benefits;

  • The duration and frequency of infringement;

  • Criminal penalties;

  • The infringer’s financial status; and

  • The infringer’s efforts to minimise harm to the patentee.

Since its implementation in 2019, there have been no reported court decisions recognising punitive damages. The reason may be that the eight factors for awarding additional damages involve subjective elements, leading to a cautious approach by the courts in granting treble damages.

Furthermore, effective as of December 2020, the method of calculating damages for patent infringement has been amended to redress the conventional ‘lost profit’ calculation method capped by the patentee’s production capacity, even if the total sales volume of infringing goods exceeded the patentee’s production capacity. Specifically, the amendment made in December 2020 to the KPA allows the patentee to receive, in addition to the damages within the patentee’s production capability, damages calculated by multiplying a reasonable royalty with the number of infringing articles exceeding the patentee’s production capability. Accordingly, the new calculation method enables the patentee to claim expanded damages, in excess of the past limitation.

The above amendments have been extended to other areas of IP law, including the Trademark Act, the Design Protection Act and the Unfair Competition Prevention and Trade Secret Protection Act (UCPA). However, it should be noted that punitive damages under the UCPA are applicable only to acts of business method misappropriation and trade secret misappropriation.

Facilitation of proactive criminal investigations for patent infringement

Traditionally, trademark infringement may be criminally prosecuted even without a complaint filed by the trademark owner. By contrast, in the case of patent infringement, the initiation of police or prosecutorial investigations required a complaint filed by the patentee. However, since October 2020, investigative authorities are now able to initiate their own patent infringement case investigation, even if there is no complaint lodged by the patentee, unless the patentee expressly opposes such investigation. This amendment to the KPA has particularly empowered the Special Judicial Police (SJP) within the KIPO to proactively investigate patent infringement cases encountered during its duties.

Similar amendments were also made to the Design Protection Act and the Utility Model Act, and, therefore, authorities may now initiate investigations ex officio against offences related to any industrial property rights – such as patent, utility model, trademark or design – without the need for a criminal complaint.

Strengthened protection against business information misappropriation under the UCPA

An amendment to the UCPA, which took effect in April 2021, enhanced protection against misappropriation of business information, which is defined under the UCPA as an act of utilising or enabling the use of another party's valuable technical or business ideas acquired during transactions without the other party’s consent.

Previously, civil damages against business information misappropriation were regarded as insufficient because the damages were based on lost profit calculation. To redress this limitation, the amendment introduced punitive damages, enabling compensation of up to three times the actual damages incurred. Furthermore, the amendment expanded the administrative agencies’ (including the KIPO’s) investigative authority for recommending corrective measures against such misappropriation. In particular, in cases where the violating parties (usually large corporations that have subcontracting transactions with SMEs) fail to comply with such corrective measures, the administrative agency may publicly disclose the details of the violation and the details of the corrective measures.

Despite the above amendments to the UCPA, however, lack of enforceability has remained an issue. In fact, between 2018 and May 2023, although the KIPO had issued corrective measures regarding business information misappropriation six times, only two cases were resolved with the parties’ voluntary compliance. Therefore, the KIPO announced in June that it will introduce a new system that imposes fines when the recommended actions are not followed by the violating parties against which the corrective measures were taken. Furthermore, the KIPO aims to significantly reduce the period for the administrative investigation to about six months from the current 11 months by prioritising business information misappropriation cases.

The KIPO also announced in June 2023 that, for the expeditious and comprehensive resolution of business information misappropriation cases, the industrial property rights dispute mediation service and criminal investigation by the SJP (both described in detail below) will be involved in the administrative investigation.

Promotion of alternative dispute resolution by mediation

Resolving IP disputes takes considerable cost, time and resources, especially for individuals and SMEs that often have difficulty securing resources. To offer an option to resolve disputes quickly and amicably at a lower cost through consultation and settlement outside the courtroom, the KIPO has established 'industrial property rights dispute mediation’, which is accessible to any parties involved in IP-related disputes, such as patents, trademarks, designs, utility models, trade secrets, unfair competitions, and employee inventions.

According to the KIPO, the number of requests for mediation has increased by an average of 19% over the past four years, from 45 cases in 2019 to 76 cases in 2022, with the number projected to exceed 100 by December 2023. Furthermore, the success rate of mediation has been significant, with an average of 66% of the cases resulting in successful resolution during the same period.

Recent five-year mediation requests and resolution status

 

2019

2020

2021

2022

April 2023

Total

Requests

45

70

83

76

38

312

Status

Resolved(A)

19

32

38

35

6

130

No resolution(B)

Non-acceptance of mediation

2

5

4

5

 0

16

Disagreement

8

17

10

15

3

53

Subtotal

10

22

14

20

3

69

Refusal

15

16

31

19

4

85

Withdrawn

1

 0

 0

2

3

In progress

 0

 0

 0

 0

25

25

Success rate (A/(A+B))

66%

59%

73%

64%

67%

 

Recent application status by applicant classification

 

2019

2020

2021

2022

April

2023

Total

Large corporations

 0

 0

1

 0

 0

1

Medium-sized corporations

 0

1

1

 0

 0

2

Small businesses

35

59

71

73

31

269

Individuals

9

8

6

3

2

28

Others

1

2

4

 0

5

12

Total

45

70

83

76

38

312


As seen from the requesters’ spectra over the recent five years (2019–April 2023), it is evident that the number of requests from individuals and SMEs is high, with 297 out of the total 312 requests being individuals and SMEs, accounting for 95%. This shows the advantages of the industrial property dispute mediation system. Disputes can be resolved expeditiously (within an average of two months), without incurring any official fees, and the mediation process is simple and uncomplicated, making it easily accessible, even for SMEs with limited financial resources.

Expanded authority of the Special Judicial Police

Since March 2019, the SJP of the KIPO has had the authority to conduct criminal investigations and raids in connection with patent and design infringement, trade secret misappropriation and counterfeit activities under the UCPA, in addition to its previous investigative power (e.g., raid and confiscate counterfeit goods and even arrest infringers) in connection with trademark infringement under the Trademark Act and confusion of well-known marks under the UCPA.

In order to determine infringement of a patent, design or trade secret, expert knowledge of IP law is required. For patent or trade secret disputes, it is sometimes very difficult to understand the patent or trade secret in question without expertise in relevant technologies. For this reason, the KIPO, which has a pool of experts comprising about 1,200 examiners and trial examiners (including about 500 Ph.D. holders), has been given the expanded authority to take more effective measures to protect individuals and companies who have suffered from infringement of their IP rights through the SJP.

In this regard, the SJP has been a huge success. In fact, from April 2019 to 2022, the so-called Technology Police within the SJP undertook a total of 650 cases and had 1,333 suspects arrested (i.e., referred to the Prosecutor’s Office for criminal indictment). Meanwhile, the so-called Trademark Police had more than 4,600 suspects arrested for producing and/or selling counterfeit goods and had more than 12 million counterfeit items seized in total over the past 12 years.

The achievement of the Trademark Police within the SJP

 

2001–18

2019

2020

2021

2022

Total

Number of referrals to the Prosecutor’s Office

(unit: persons)

2,744

376

617

557

372

4,666

Number of seized goods

(unit: items)

5,141,270

6,269,797

720,471

78,061

383,061

12,585,182


To further strengthen its investigative power, since July 2021, the KIPO has expanded the Intellectual Property Investigation Division, which includes the SJP, to have about 60 investigators and supporting members, and reorganised the division into three subdivisions, namely:

  • The Technology Police Division;

  • The Trademark Police Division; and

  • The Unfair Competition Investigation Division.

In particular, the Technology Police’s involvement in trade secret misappropriation cases has increased dramatically, with criminal charges doubling each year and referrals to the Prosecutor's Office jumping from nine cases in 2020 to 68 cases in 2021.

In view of its huge success and effectiveness, the SJP will be a viable option for IP right holders who are in need of enforcing their IP rights in Korea.

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