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Newsletter | December 2014, Issue 4
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INTELLECTUAL PROPERTY
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Korean Supreme Court Case No. 2013Da41578 (Aug. 20, 2014) on Dissolution of a Jointly-Owned Patent
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Recently, in a case where a co-owner sought dissolution of a jointly-owned patent, the Supreme Court ordered the patent to be sold in auction and the sales proceeds therefrom to be divided to the co-owners according to their respective shares in the patent (Case No. 2013Da41578).
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Under the Korean Patent Act (“KPA”), Article 99, where a patent is jointly owned,
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Each co-owner may use, practice or work the patented invention without the consent of or accounting to the other
co-owner(s);
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Neither co-owner may assign or establish a pledge upon his share in the patent without the consent of the other
co-owner(s); and
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Neither co-owner may grant a license, either exclusive or non-exclusive, to the patent without the consent of the other
co-owner(s).
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The legislation is grounded on the concern that when a co-owner assigns his share or grants license to a third party, the economic value of the other co-owner’s share may be significantly affected or diluted depending on the third party assignee/licensee’s investment of capital or technology, etc. in practicing the patented invention. To protect the other co-owner’s interests, Article 99 of the KPA prohibits co-owners from assigning or licensing their respective shares in the patent without the consent of the other co-owner. In the same context, the Supreme Court decided that a co-owner’s share in a patent cannot be subject to attachment order by a third party without the consent of the other co-owners (Case No. 2011Ma2412, Apr. 16, 2012).
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Case No. 2013Da41578 is noteworthy in that the Supreme Court applied a general principle on the dissolution of a jointly-owned property to patents to resolve the disputes between co-owners when the co-owners no longer hold common objectives or cooperative relationship. Under the Korean Civil Code, a co-owner of a jointly-owned property, either real or tangible, can seek a court order for dissolution of the jointly-owned property if no agreement on the division can be reached among co-owners. The court, in principle, may order division in kind or physical division. However, if division in kind is impossible or impracticable due to the nature of the property or the value of the property will be significantly harmed in case of division in kind, the court may order that the property be sold by auction and the sales proceeds be divided to co-owners according to their shares in the property. While approving a co-owner’s claim for dissolution of a patent right on the ground that such dissolution would not be prejudicial to the economic value of the other co-owner’s shares in the patent, the Court did not allow division in kind (“division in kind” here means that a co-owner will be deemed to hold the rights on the property independent of the other co-owner’s rights on the same). Instead, the Court ordered the patent to be sold in auction and the sales proceeds to be divided to the co-owners according to their respective shares in the patent.
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This decision indicates that when a patent co-owner desires to end a joint ownership, he can seek the dissolution of joint ownership with a court. However, since this dissolution is done by sale in auction, the other co-owner who practices the patented invention may be prejudiced in case the patent is sold to a third party. To block such dissolution by sale in auction, he may consider entering into an agreement with the other co-owners not to seek division of the patent or cause the patent to be divided (for five years maximum permitted under Korean Civil Code, Article 268, Paragraph 1) and record such agreement in the patent registry.
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