In a recent case involving infringement on a licensee’s right to multiple intellectual property (“IP”) rights, Kim & Chang successfully represented the appellant (i.e., the defendant) in the Supreme Court, which ruled that for each licensed IP right, (i) the scope of the license for the right, (ii) whether the right was infringed upon, and (iii) the amount of damages should be individually reviewed and assessed (Supreme Court Decision 2023Da280358, October 25, 2024). When multiple IP rights cover a single product, the IP owner may grant a license to another party to manufacture/sell the product and treat the license as a “single license” to all of the IP covering the product. However, the Supreme Court decision clarified that if a court awards damages claimed by the licensee against a third party infringer, it must separately calculate the amount of damages for each licensed IP right.

Comprehensive IP licenses to manufacture and sell specific products often include the exclusive right to manufacture and sell the product, where the exclusive licensee’s rights are based on multiple IP rights (e.g., technical know-how, patent right, design right, trademark right, etc.). As such licenses are ultimately intended to cover the manufacture and selling of a specific product, in practice, they have often been treated as a single right by licensors/licensees. The lower court decision in this case awarded a single total damages award for infringement in line with this practice.

Representing the defendant in the Supreme Court appeal, we argued that (i) the plaintiff cannot claim damages for infringement based solely on the exclusive right to manufacture/sell the product granted by the license contract, but only in connection with the exclusive license to each of the IP rights in the agreement, and (ii) each of the plaintiff’s IP rights needs to be treated as independent for purposes of enforcement. The Supreme Court agreed with this argument and ruled that a damages claim based on the infringement of multiple IP rights must explain how the damages are related to each of the asserted IP rights separately.
 

• The plaintiff was granted an exclusive license to Company A’s product. The defendant’s manufacture and sale of the product even after the termination of its license agreement with the plaintiff constituted an unauthorized use of the licensed IP rights and therefore infringed the plaintiff’s rights as the licensee and sub-licensor of these rights.
   

• Even the plaintiff’s damages arising from the defendant’s infringement of the licensed trademark alone (the entire sales revenue of the product was used as the basis for calculating such damages) must be higher than the plaintiff’s partial claim amount of the total damages.
   

However, the Supreme Court reversed the IP High Court’s decision and remanded it for further proceedings, ruling that the IP High Court’s decision was unlawful because it misapplied the relevant legal principles and improperly failed to fully exercise the court’s right to request clarification from the plaintiff, as summarized below:
 

• An exclusive license is granted for the “practice” of IP rights that are defined under the Patent Act and the Trademark Act, among others, and the scope of the license varies depending on which “right” it relates to. However, the license agreement between Company A and the plaintiff makes it clear that the license is directed to a specific “product,” rather than specific IP rights, and thus the use of the term “exclusive license” in the agreement is inappropriate. Specifically, it is difficult to ascertain whether the exclusive license allegedly infringed refers to the right to exclusively practice the licensed patents in relation to the specific product at issue, or whether any other rights of a different nature are infringed upon.
   

• While the plaintiff claims damages for the defendant’s post-termination manufacturing and selling of the product based on misappropriation of trade secrets and infringement of exclusive licenses to patent, design and trademark rights, the plaintiff failed to specify the amount of damages attributable to the infringement of each specific IP right, and claimed only a portion of the total damages. As the plaintiff did not specify the damages specifically attributable to each infringement, the IP High Court should have requested clarification from the plaintiff, but failed to do so.
   

• The plaintiff’s damages arising from the defendant’s sale of the infringing product after the termination of the license agreement (e.g., reducing the sales of the plaintiff’s product or decreasing royalties) may include not only the damages arising from the infringement of the plaintiff’s exclusively licensed trademark, but also damages arising from the infringement of the exclusively licensed design right. However, the IP High court calculated the amount of damages based only on the trademark infringement, without identifying how much the trademark infringement contributed to the reduction of sales or royalties, and failed to calculate the amount of damages for the other infringed IP rights, solely on the ground that even the amount of damages from the trademark infringement alone would clearly exceed the damages claimed by the plaintiff. Given that the IP High Court should have assessed the level of contribution of the defendant’s infringement of the trademark to the overall decrease in the plaintiff’s sales or royalties, it was unlawful that the court didn’t exercise its right to request clarification pursuant to such assessment.
   

The Supreme Court decision clarifies that any license to manufacture or sell a product should distinguish each specific IP right being licensed to the licensee. In light of this ruling, IP rights holders seeking to enforce their rights in Korea are expected to bear additional burden, as  licensors will be required to specify each IP right being infringed upon as well as the amount of damages to be allocated to the infringement of each right.