IP Newsletter | Spring/Summer 2019
	PATENT
	Supreme Court Rules that the First Sale Doctrine Also Exhausts Process Patents
	In a significant recent decision, the Korean Supreme Court expressly recognized that the first-sale doctrine applies to exhaust not only apparatus patent rights covering a patented product that is sold, but also any process patents that are substantially embodied in the product (Case No. 2017Da289903, January 31, 2019).
	Background
	The Welding Institute (the patentee) granted a non-sublicenseable, non-exclusive license to Company A to the patent at issue to use the patented process, as well as to make, demonstrate and sell equipment suitable for performing the patented process. The patent was directed to a method of welding materials together without melting the materials (friction stir welding, or FSW). The defendant, a semiconductor equipment manufacturer, acquired an FSW machine manufactured by Company A, which would perform the patented process when used. The Welding Institute subsequently sued the defendant for infringing its process patent.
	The Supreme Court's ruling regarding patent exhaustion
	There are actually very few statutes or cases in Korea relating to patent exhaustion, but it is generally recognized that a patentee or licensee selling a product covered by a product patent exhausts those product patent rights with respect to that product. In other words, the buyer/transferee of the patented product may freely use, sell or otherwise exploit the patented product in Korea without incurring patent infringement liability.
	The recent Supreme Court decision applied the same general logic to process patents to hold that a product substantially embodying a patented process that is made or sold by a patentee or its licensee exhausts those process patent rights in the product as well. While the Court did not analyze the issue in detail, it concluded that it would unduly impede free distribution and safe transaction of products substantially embodying a patented process if a buyer/transferee were required to obtain the patentee's approval simply in order to use such products; that the patentee in this case was in the best position to determine the appropriate price or royalty for the patent-embodying machine in view of the use of the machine and exploitation of the patented process by the purchaser; and that holding that process patents were not subject to exhaustion would create a loophole that a patentee could exploit to avoid patent exhaustion simply by including a process invention in its patent claims.
	In determining whether the product at issue substantially embodied the patented process, the Court indicated the following factors should be taken into account: (i) whether the product was originally designed to implement the patented process exclusively with no other substantive practical or commercial application, (ii) whether all critical elements of the patented process are included in the product, and (iii) the significance of the process implemented by the product in all the patented process.
	The Supreme Court's ruling regarding "have made"
	In another case involving the same patent, the patentee asserted indirect infringement against a manufacturer who supplied a machine designed to implement the patented process exclusively to Company B (a licensee authorized by the patentee), pursuant to a manufacturing order given by Company B. In that case, the Supreme Court held that the defendant's manufacture and supply of the machine to the licensee did not indirectly infringe the patentee's rights (Case No. 2017Da290095, February 28, 2019). Further, use of the patented process in testing and examination of the machine for the purpose of supply to the licensee also did not infringe the patent.
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	Mikyung (MK) CHOE mkchoe@kimchang.com Seoung-Soo LEE sslee@kimchang.com
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