Korea: Intellectual Property

Changes in IP law

According to a report published by the World Intellectual Property Organization (WIPO) on February 2007, the number of international patent applications filed under the Patent Cooperation Treaty in 2006 from Korea was 5,935: an increase of 26.6 per cent compared to the previous year.This ranks Korea fourth after the US, Japan and Germany.¹ Korea has moved quickly up the rankings from ninth in 2002, seventh in 2003 and 2004, sixth in 2005 and fourth in 2006.

This illustrates the status of Korea in the global competition stage, as Korea has been rapidly developed into an information and technological society. Accordingly, Korea is continuing its legal and systemic support for the protection of intellectual property rights to satisfy the global standard.

Table 1: Protected subject matters and relevant intellectual property law

There are no written laws that govern the publicity right but the precedents have clearly recognised these rights. The Supreme Court ruled that everyone has exclusive rights to use his or her persona commercially, which rights are constitutionally protected under article 10(1) of the Constitution of the Republic of Korea (2004da16280 (Supreme Court, 13 October 2006).

In 2006, Korea amended the applicable laws to strengthen the protection of the intellectual property rights.

Trademark Act

Concerning trademark rights, the newly amended Act expanded the scope of trademarks that can be protected by the trademark rights (article 2(1)(1) of the Trademark Act, which will be in force on 29 June 2007).

Previously the Trademark Act only recognised marks, letters, diagrams or three-dimensional form or those combined with colours as trademarks; however, in consideration of the reality of the increasing market value of the trademark and the continuous development of new types of the trademark, the newly amended Act will govern all types of trademarks that can be recognised visually such as colour, hologram and motion.

Amendment to Copyright Act (in force 29 June 2007)

The Copyright Act was amended to promote fair use of copyrighted works and prevent infringement; and to allow the minister of culture and tourism to establish and enforce the policy regarding the certification of copyright and rights management information as well as technical measure of protection. The details of the amendments are as follows.

• Introduction of copyright certification system (article 2(33) and article 56): the certification system has been introduced to guarantee the sound distribution order of the copyrighted works.


• Use of political speeches, et cetera (article 24): it is permissible to use works made public such as political speeches, unless a collection of speeches made by the same person is compiled and distributed. For example, a book compiling speeches made by Bill Clinton is not permissible without getting a licence from him.


• Transmission of copyright for school education (article 25(4) and article 10): if copyrighted material is transmitted for the purpose of education in high school level and thereunder, no compensation will be paid to the copyright owner so long as the works are furnished with reproduction-preventing measures.


• Reproduction of news reports and editorials (article 27): articles and editorials provided by newspapers, internet news services and news agencies may be reproduced, distributed, or broadcast freely by other media organisations, provided, however, that such articles and editorials are not accompanied by indications prohibiting such uses.


• Protection of phonograms produced by a citizen of a member country (article 64): with regard to the phonograms that are protected under treaties subscribed or joined by Korea, the phonogram produced by a citizen of a member country will be protected under the new amendment of the Act.


• Performer's right to indicate name, et cetera (articles 66 to 68, 70 to 72, 76, 80 and 83 of the Copyright Act): performers are newly granted the right to indicate their names and the right to maintain identity of his or her works. In addition, the following rights are newly recognised as related copyrights: right of distribution, rental of the copies of performances, right to perform unfixed performances and right to claim compensation for transmission of digital sounds for the performers, right of rental of phonograms and right to claim for compensation for transmission of digital sounds for phonogram producer.


• Protection period of neighbouring copyrights (article 86 of the Copyright Act): the time from which the protection period of such neighbouring rights begins to be calculated has changed from the time when sounds are first fixed into the phonogram to the time when the phonogram is released to the public.


• Obligations of special types of online service providers (article 104(1) of the Copyright Act): with respect to online service providers whose main business is to enable transmission of copyrighted works between users by means of computers, this article requires such service providers to take necessary measures as prescribed by the Presidential Decree, such as technological measures, to block illegal transmission of the copyrighted works upon request of copyright holder.


• Copyright Commission (articles 112, 113 and 114 of the Copyright Act): the name of Copyright Commission for Deliberation and Conciliation was changed to the Copyright Commission and the following duties shall be additionally assumed by the commission: fair use of copyright, research, education and promotion of copyright, support of copyright policy establishing, support of policymaking about technical protection measures and information on management of rights. To efficiently mediate copyright disputes, a mediation committee shall be established under the Copyright Committee.


• Collection, disposal and removal of illegal reproductions (articles 133 and 142 of the Copyright Act): under the revised Copyright Act, the minister of culture and tourism may seize and dispose of illegal reproductions of copyrighted materials and may order the removal of such illegal reproductions from the internet, and may impose a fine of not more than 10 million Korean won on persons who fail to comply with such order of removal.


• Exception to offence subject to prosecution on complaint (article 140 of the Copyright Act): by excluding from the offence subject to prosecution on complaint such acts as habitual infringement on copyrights for commercial purposes, such acts can be subject to criminal punishments without complaint of copyright holders.



 
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Potential influence of KORUS on Korean intellectual property-related laws and systems

Regarding KORUS (Korea-US free-trade agreement concluded on 2 April 2007), it is expected that relevant laws will be amended after the ratification of the National Assembly.

Copyright

• The period of copyright protection will be extended to 70 years after the death of the author or the publication date of copyrighted works


• Recognition of reproduction right with respect to temporary saving in computer RAM


• Reinforcement of immunity provisions for online service providers: imposition of different liabilities through classification pursuant to online service provider's control power over to the online infringement


• Prohibition on receipt and usage of illegally decoded satellite or cable signals


• Government obligation to use authentic copyrighted materials.



 
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Trademarks

• Collective mark or trademark holders of geographical marks are granted exclusive right based on the first-to-file principle


• Annulment of requisites for registration for the licensing of trademarks


• Smells or sounds can be registered as trademarks


• Introduction of certification mark.



 
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Patent

• Introduction of extension of patent terms to cover delays due to reasons attributable to the Korean Intellectual Property Office, when a patent has been registered after the lapse of four years from the filing of patent application and three years from the filing of petition for examination


• The grace period, during which an inventor can file for patent registration even after his or her own disclosure of an invention, is extended from the current six months to 12 months after such disclosure.



 
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Enforcement

• Introduction of statutory damages in trademark and copyright infringement cases: within the scope not impairing the principle of compensation for actual damages


• Reinforcement of civil procedures by granting courts the authority to prohibit export of infringing products referred to the courts


• Empowering judicial authorities to prosecute for copyright infringement without complaint thereof


• Introduction of reporting system to abolish clearance automatically and to notify copyright holders with respect to those products suspected of infringing on copyright.



 
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IPR and antitrust in Korea

Applicable provisions of competition laws concerning IPR

The Monopoly Regulation and Fair Trade Act (MRFTA) allows for an exception with respect to legitimate exercise of intellectual property rights. Article 59 of the MRFTA stipulates that this Act shall not apply to any acts that are deemed an exercise of rights under the Copyright Act, the Patent Act, the Utility Model Act, the Design Protection Act or the Trademark Act.

However, the MRFTA does not exclude all kinds of exercise of intellectual property rights. It is recognised that the MRFTA can apply to certain types of exercise of intellectual property rights that runs counter to the designed policies of the intellectual property rights, which is to promote invention and creation, and accordingly, that cannot be seen as a legitimate exercise of intellectual property rights. Indeed, in practice, the MRFTA is being applied to such abusive exercise of intellectual property rights. It is identical to the legislation in other developed nations. It is because of the idea that competition policies and patent system complement each other and share the common purpose of promoting innovation and maximising consumer welfare.

Further, it is based on the legislative policies that no competition-restraining effect of exclusive exercise of patent rights that goes beyond the purpose of promoting innovation could be tolerated. The Patent Act does not expressly set forth provisions concerning abuse of patent rights. However, article 107 of this Act provides that compulsory licensing of a patent invention is permitted in certain cases that were recognised as abusive or unfair conduct by an administrative or judicial institution and such compulsory licence is required for readjustment.

Moreover, provisions such as granting of a non-exclusive licence by the head of the Patent Office for a patent that has not been used for three years or more shows an internal limitation of the exclusive rights of patent.

Aside from article 59 of the MRFTA, article 32 prohibits execution of international contracts containing intellectual property rights that violate the MRFTA, and article 33 provides that one may request the Korea Fair Trade Commission (KFTC) to review whether a particular international contract falls under article 32. Although recently no decision has been made with respect to this, small and medium-sized companies in Korea, however, think that articles 32 and 33 give them increased negotiating power when executing contracts with large foreign companies.

Furthermore, with respect to trademark rights and copyrights, the MRFTA generally recognises parallel imports and prohibits any acts by businesses involving intellectual property rights that interfere with such parallel imports (notification No. 1997-7 concerning Types of Unfair Trade Activities in Parallel Import).

IPR Guideline

The KFTC has a guideline (Guideline of Reviewing Undue Exercise of Intellectual Property Rights (20 August 2000)) specifying in detail what falls under unfair exercise of intellectual property rights based on interpretation of the provisions of article 59 of the MRFTA, and which provision of that Act should apply to cases of unfair exercise of intellectual property rights.

The Guideline applies to all transactions concerning intellectual property rights, including licensing to a third party, cross-licensing, pooling arrangements and assignment of industrial property rights such as patent rights, trademark rights, design rights, trade secret, know-how and copyrights; provided that, for international transactions, article 32 of the MRFTA will apply.

This provision requires that provisions of the MRFTA applicable to cartels, abuse of dominant position, business combinations, resale price maintenance and provisions concerning general unfair practices among companies, shall apply to corresponding unfair exercise of intellectual property rights. Generally, in reviewing the cases, it is required that the effects on competition, the term of the agreement and the conditions of the related market should be comprehensively considered, in addition to each element of unlawfulness of the relevant provisions. This can be seen as an approach based on the rule of reason. This guideline specifies 17 types of unlawful acts, and provides the list of acts that are considered to be illegal, and those that are not (white list), with respect to each type of acts.

The following acts are defined as generally unfair trade activities:

(i) tying arrangements of raw materials, parts, manufacturing equipment, etc;

(ii) forcing licensees to use the trademarks or designs designated by the licensor;

(iii) restriction on exporting territories;

(iv) horizontal restrictions on sales territories;

(v) restrictions on customers;

(vi) restrictions on transaction quantities;

(vii) restrictions on transaction methods and designation of sale or resale prices; and

(viii) restrictions on the use of competing products, restrictions on the use of IPR after its expiration, charging royalties on non-licensed products, tying technology, restrictions on R&D, requiring excessive sales promotion expenses, and unfair refusal to license, et cetera.

Cross-licensing and pooling arrangements are subject to the cartel provision, and acquisition of IPRs is subject to the M&A provision, where it is the case that the IPRs consists of major parts of a business, or the licensing of IPRs is practically equivalent to the acquisition, for example, such as exclusive licensing.

Relevant cases

The KFTC has so far not engaged in active enforcement for violations of the MRFTA regulations regarding IPRs. However, the KFTC has applied the MRFTA with regard to undue exercise of IPRs in the 1997 Korea Coca-Cola case of refusal to deal and in the 1998 Procter & Gamble merger case.

Coca-Cola centred on whether the case constituted a refusal to deal in connection with the negotiation for expansion of the IPR agreement period. The KFTC and the Seoul High Court ruled that such practice was illegal, but the Supreme Court found the case legitimate. Procter & Gamble was a merger transaction between the companies, which were holding a number of IPRs. It was granted on the condition that part of the IPRs should be transferred to a third party.

Rainbow Scape Co, Ltd of 26 July 2005 regarded the abuse of position in transactions. The court found the company's execution of a licence agreement on condition that other construction works to which the licensed patent technology was not applied should be subcontracted to the company was illegal.

In Insung Industry on 9 September 2005, the court also found illegal the company's act of unfairly denying the other party use of its new technology.

The issue of the Space Co, Ltd in November 2006 was the same as the Insung Industry case.

The KFTC ruled in 2006 that Microsoft's bundling of software is illegal. Microsoft's tying of Media Server to the Server OS, and Media Player and Messenger Software to the PC OS, were found to be illegal abuses of dominant market positions. As set forth above, the KFTC recently conducted intensive investigations into the abuse of a dominant position by large companies with market dominant power with regard to transactions relating to IPR.

Evaluation

Generally the MRFTA and the policies of the KFTC with regard to IPR cases seem reasonable. This is demonstrated by the attitudes of the KFTC and courts, which apply a kind of rule of reason requesting the actual analysis on the effect of restricting competition and denying presumption of dominant position solely relying on the ownership of IPRs. Furthermore, the KFTC considers IPRs as the same as other property rights in principle, and licensing as a pro-competitive act promoting production activities.

The KFTC plans to announce a guideline for determination of violations of MRFTA with regard to 'establishing technical standards' within the year, promote IT innovation in the knowledge economy era.

If those, who are found by the KFTC violating MRFTA with regard to the exercise of IPR, do not accept the KFTC's decision, they can bring the case to the Seoul High Court and then the Supreme Court. The claims for compensation for damages caused by undue exercise of IPR can be filed directly with civil courts, or otherwise such claims may be filed after a decision is made by KFTC as a follow-up measure. However, there has been no such case reported so far.

Notes

1. Record Year for International Patent Filings with Significant Growth from Northeast Asia, Geneva , February 8, 2007, WIPO/PR/2007/476, www.wipo.int/pressroom/en/articles/2007/article_0008.html, visited 9 April 2007.