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Newsletter | April 2015, Issue 1
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INTELLECTUAL PROPERTY
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Korea Fair Trade Commission Amends IPR Guidelines, Effective December 24, 2014
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The Korea Fair Trade Commission ("KFTC") made significant amendments to its "Guidelines on the Unfair Exercise of Intellectual Property Rights" ("Amended IPR Guidelines" or "Guidelines") on December 17, 2014, effective as of December 24, 2014. The Amended IPR Guidelines reflect the KFTC's active interest in applying competition law against "unfair exercise" of intellectual property rights.
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Main aspects of the Amended IPR Guidelines are as follows:
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New section on Standard Essential Patent (“SEP”) Holders' Claim for Injunction
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The Amended IPR Guidelines appear to balance the interests of both SEP holders and implementers, stating that an SEP holder is not automatically required to grant a license to third parties, but since an SEP holder who provided a FRAND commitment is obliged to engage in good-faith negotiations, an injunction against a "willing licensee" may be determined as anti-competitive.
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The Amended IPR Guidelines provide some details on the standards for what would constitute good-faith negotiations on the part of the SEP holder, but relatively little details on what is meant by a "willing licensee." The Guidelines do mention the possibility of "reverse hold-up" by "unwilling licensees," and give examples of where an SEP holder's injunction is less likely to be held as anti-competitive. However, the examples given appear to be fairly narrow in scope, such as when a potential licensee refuses to be bound by or comply with the FRAND terms that are to be determined by a court or arbitral institution, or when a claim for injunction is found to be the only available remedy because it is difficult to expect to recover damages from a potential licensee due to, e.g., imminent bankruptcy of the potential licensee.
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As to the SEP, in addition to the above new section on injunctive relief, the Guidelines continue to include the provisions on the abuse of the standardization procedure or demanding unfair terms after the adoption as the standard technology which may be deemed as being beyond the legitimate scope of patent rights, as follows:
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An act of unfairly agreeing on certain terms such as the price, quantity, territory, counterparts, and restriction on technology improvement, etc., during the consultation for selection of standard technology;
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An act of unfairly refusing to disclose information about the related patent application or registered patents owned by oneself to increase the possibility of being selected as the standard technology or to avoid prior consultation on license terms;
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An act of unfairly avoiding or circumventing licensing on FRAND terms to strengthen monopolistic power in the relevant market or exclude competitors;
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An act of unfairly refusing to grant licenses for the SEP; or
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An act of discriminating the SEP license terms, or of imposing royalty at an unreasonable level, thereby restricting competition.
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New section on Non-Practicing Entity ("NPE")
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In referring to NPEs, the Guidelines created a new term, Enterprisers Specializing in Patent Management ("ESPM"), and defined it as enterprisers who generate profits through the exercise of patent rights against implementers without engaging themselves in the manufacture or sale of goods or provision of services using the patented technology. Possible abusive acts by such ESPMs include the following, and the Guidelines state that these provisions can also apply to non-ESPM patentees.
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The imposition of markedly unreasonable royalties in light of normal trade practice;
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Denying the application of FRAND conditions that used to apply to the previous owner of a patent while imposing markedly unreasonable royalties;
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Members of a consortium forming an ESPM unfairly agreeing to refuse to license, or to license on a discriminatory basis, to non-members;
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Engaging in patent suits or sending warning letters in a manner that causes misunderstandings or makes it difficult for the other party to defend against the suit (e.g., by hiding or omitting important information); or
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The patent holder transferring its patent rights to an NPE and causing the NPE to commit the acts of (1) and (2) above, etc. against other enterprises.
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KFTC's Enforcement Plans
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In the press release accompanying the Amended Guidelines, the KFTC stated that it will continue to monitor the abuse of IPRs in the future. Also, the KFTC made its annual report to the Office of the President on its enforcement plans for 2015 ("2015 Annual Report") on January 13, 2015. Notably, the KFTC plans to continue to focus its attention on the information & communications technology ("ICT") sector by establishing a Special Task Force on the ICT Sector. The 2015 Annual Report also identifies the mobile and platform sectors and software and IP sectors as areas of particular interest. In this regard, the 2015 Annual Report states that the KFTC will engage in close monitoring of abuse of dominance, such as illegal tying by dominant software developers and abuse of patent rights by the firms with control over standard technology (such as coercing grant backs of the licensee's independently-obtained knowledge, experience or technological achievements regarding the contracted products or contracted technology to the licensor, or unreasonably charging royalty for parts which have not used for the licensed technology).
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Together with the Amended IPR Guidelines, it is expected that the KFTC will pay close attention to the IP licensing and enforcement practices in the ICT and software industries, and developments as related to SEPs and NPEs. Please do not hesitate to let us know if you have any questions.
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