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Newsletter | July 2016, Issue 2
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ANTITRUST & COMPETITION
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KFTC’s Amended IP Rights Guidelines Seek to Address “De Facto” SEP-related Criticisms
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On December 16, 2015, the Korea Fair Trade Commission (“KFTC”) announced the amendment to its Guidelines on the Unfair Exercise of Intellectual Property Rights (“Amendment” and “IPR Guidelines,” respectively). The Amendment became effective as of March 23, 2016.
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The IPR Guidelines govern how the KFTC will evaluate the exercise of intellectual property (“IP”) rights, such as standard essential patents (“SEPs”) under the Korean competition law.
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The Amendment seeks to address criticisms that the pre-existing IPR Guidelines was problematic by purporting to govern so called “de facto” SEPs.
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The IPR Guidelines defined “de facto SEPs” as patents similar in function to SEPs but not adopted to a standard by a standard setting organization (“SSO”). Also, the IPR Guidelines allowed the KFTC to evaluate the exercise of “de facto” SEPs under similar standards used to evaluate SEPs.
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However, SEPs are technologies designated as necessary to a standard set by an SSO and therefore, they have the potential to exercise anti-competitive restraint in a manner of a fundamentally different kind from normal patent rights. Many commenters had noted that applying standards applicable to SEPs to so called “de facto” SEPs would excessively restrict the legitimate exercise of patent rights where it is unclear that such a threat to competition exists.
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Through the Amendment, the KFTC sought to address this criticism by making it clear that the standards governing SEPs would be limited to SEPs, and not apply to “de facto” SEPs.
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The Amendment’s major items are:
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1. Changes to the Definition of the Term “SEP”
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The Amendment limits the definition of “standard technologies” to technologies designated as standards by SSOs. Further, re-defined SEPs incorporate a commitment to license the patents on fair, reasonable, and non-discriminatory (“FRAND”) terms. Thus, a SEP is now defined as a standard technology, requiring its patent holder to make a FRAND commitment to license the patent in the standard setting process.
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2. Removal of References to the Term “De Facto SEPs”
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Also, a refusal to license de facto SEPs is not per se illegal, and instead, subject to a “rule of reason” test, under which all circumstances may be weighed (e.g., efficiency gains as opposed to anticompetitive effects or a restraint to competition).
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3. Clarification of the Objective of the IPR Guidelines and Standards for Determining Unfair Refusal to License
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The Amendment clarifies that the objective of the IPR Guidelines is to promote free and fair competition. In light of this, when determining unfairness of a refusal to grant a license, the Amendment provides that various factors should be considered, such as intent of the refusal, anticompetitive effect, likelihood that the patent can be replaced, and whether the patent is essential to promote market competition.
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Potential Impact
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Due to the clarifications made in the Amendment, we expect that the IPR Guidelines will more greatly encourage proactive exercise of patent rights, enhance predictability of the KFTC’s IPR regulation through clarified definitions and criteria, and eventually lead to an improved regulatory environment.
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