Korea strengthens protection against IP infringement and unfair competition (Amendment of the Patent Act and the Unfair Competition Prevention Act) | On December 7, 2018 the Korea National Assembly approved a bill to amend the Patent Act and the Unfair Competition Prevention and Trade Secret Prevention Act (“UCPA”). Highlights of the proposed amendment include strengthening penalties for patent infringements and further relaxing the burden of proof for patent holders. The amendments are expected to be effective in July 2019. | Willful infringers to face treble damages | | The latest amendment to the Patent Act and the UCPA adopts a punitive damage system in which damages arising from willful infringement will be increased up to three times the actual compensatory damages to be awarded to a prevailing patentee. In determining the actual amount of damages, the revision bill requires the court to consider factors that closely relate to the infringer’s intent. For example, the court will not only be actively considering the economic gain achieved by the infringer through the infringing act, the extent of damages, the period over which the infringing act occurred, the frequency of the infringing act, and the infringer’s effort in remedying the patent holder’s damages, but also the infringer’s superior bargaining power, financial condition, and degree of awareness regarding culpability and risk of damage. | Relaxing of burden of proof in proving infringement | Another important amendment to the Patent Act includes further alleviating the burden of proof for patent holders when proving infringement. Traditionally, patentees in Korea often faced difficulties in proving infringement, especially if the accused product or process is not publicly available (and in most cases, infringers hold key evidences to proving infringement). One aspect that continuously exacerbated patentees’ difficulty in proving infringement in Korea has been the fact that there is no US-style discovery. Although the Korean Civil Procedure Act allows a patentee to request a court order against the alleged infringer for submission of relevant documents, in practice, the alleged infringers were able to avoid any production by asserting that the requested documents contain trade secrets and simply refusing to produce them. Thus, patentees have often been unable to gather sufficient information about the accused product or process that can prove infringement or damages.
In order to address this difficulty, the Patent Act was amended in 2016 to allow the court, upon the patentee’s request, to compel the alleged infringer to submit documents, including materials necessary for proving infringement or the damages amount. However, due to the trade secrets issue raised by the alleged infringer, this amendment has not been actively used by the courts and patentees still faced much difficulty in securing the relevant documents and materials, especially for patents related to production methods.
In light of the ongoing difficulties faced by patentees, the National Assembly approved the revision bill that allowed the court to compel the alleged infringer not only to produce the relevant documents and materials but also to disclose the specific information about the accused product or process. Under the revision bill, we interpret that as long as a patentee can specifically prove the existence of infringement with reasonable probability, then the alleged infringer denying such existence of infringement has the obligation to present specific information about the element/composition of the accused product or process. If the alleged infringer argues that it has a valid reason for not making such presentation, however, the court may order submission of the relevant documents and materials against the alleged infringer to determine whether the alleged infringer does have a valid cause for non-presentation. The revision bill allows the court to deem the patentee’s allegation to be true if the alleged infringer does not have a valid cause.
Although this latest amendment to the Patent Act alleviates patentees’ burden of proof by no longer allowing alleged infringers to avoid liability by simply denying a patentee’s allegations, the practical meaning of this amendment remains unclear as the alleged infringers would still be allowed to refuse production of the relevant documents and materials as long as there is a valid cause for non-production. | UPCA to relax standard for defining trade secret and impose harsher criminal punishment to infringers | The latest amendments to the UPCA include further relaxation of the standard for defining trade secrets. Under the current UPCA, the term “trade secret” includes production methods, sales methods or other useful technical or business information, which information is not known publicly, has independent economic value and has been “maintained as confidential based on reasonable efforts.” The revision bill deletes the “reasonable efforts” standard and recognizes production methods, sales methods and other useful technical or business information as trade secrets as long as the confidentiality of such information has been maintained. This amendment significantly lowers the threshold for information to become a trade secret and is expected to provide more protection for small and mid-sized businesses that were unable to meet the maintenance standard required under the current UPCA.
The UPCA’s penal provisions were also amended, for example, the revision bill expands the act that would constitute an misappropriation of trade secret from “an act of acquiring, using or disclosing to a third party, trade secrets,” to also “an act of disclosing trade secrets out of the given authorized area” and “an act of refusing or avoiding the request of a trade secret holder to delete or return such trade secrets or keeping copies of the foregoing even after the authority to use or maintain such trade secrets has expired.”
Further, under the latest amendment to the UPCA, harsher criminal punishments on infringers will be imposed by increasing the prison terms and fines effective under the current UPCA (e.g., using trade secrets outside of Korea or using them knowing that they will be used outside of Korea is now subject to a prison term of not more than 15 years or a fine of 1.5 billion won, whereas before the amendment the punishment was not more than 10 years of prison term or a fine of 100 million won).
In light of these new changes to the Patent Act and the UPCA, strong sanctions against technology extortion are expected to take place, providing wider protection to patent holders and trade secret holders in Korea. | Lee & Ko’s IP Practice Group has significant experience and expertise in IP cases and disputes, as well as representing and defending corporate IP rights, seeking remedies against infringement, and responding to infringement claims. Lee & Ko is uniquely positioned to provide client-centered services for such legal issues and disputes. If you would like to know more about our firm or the latest revision bill, please do not hesitate to contact us. | | | | | | |
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