Kim & Chang successfully appealed for a reversal of administrative sanctions by the Korean Fair Trade Commission (the “KFTC”) regarding alleged abuse of market dominance under the Monopoly Regulation and Fair Trade Law (the “Fair Trade Law”).
The KFTC imposed administrative sanctions against Siemens Healthineers alleging that Siemens Healthineers abused its market dominance against independent service organizations (“ISOs”) in the CT/MRI equipment maintenance & service market. The KFTC found that whereas the customary trade practice in the industry was to grant free access to the maintenance & service software (“SSW”) embedded in the CT/MRI equipment, Siemens Healthineers discriminated against customer hospitals that used ISO maintenance & services by charging fees and imposing different conditions. The KFTC imposed an administrative fine and issued, among others, a corrective order for Siemens Healthineers to provide free access to its SSW and to stop discriminatory treatment.
Kim & Chang represented Siemens Healthineers throughout the KFTC investigation and subsequent appeal to the Seoul High Court (the “Court”). The Court accepted Kim & Chang’s arguments and overturned in entirety the above administrative sanctions against Siemens Healthineers. Even though Siemens Healthineers had provided in some instances free access to its SSW, the Kim & Chang litigators argued that (i) contrary to the KFTC’s finding, the customary trade practice for access to the SSW was, in fact, license for fee (with certain exceptions based on the intended use of SSW), and (ii) applying different conditions for access to SSW depending on its specific intended use is a reasonable practice, and not an act of discrimination. The Court accepted Kim & Chang’s arguments in full.
The stakes were high in this case. For the KFTC, the original corrective decision against Siemens Healthineers was part of its attempt to revitalize regulation of abuse of dominant position cases. Such cases had significantly slowed down since the Supreme Court’s en banc decision in an important earlier case involving POSCO (where the court found that in addition to anti-competitive effect, there must also be anti-competitive intent to establish abuse of dominance). The KFTC was seeking to help stimulate ISO activities in the local medical equipment maintenance & service market and had investigated the case for more than two years.
Meanwhile, for Siemens Healthineers, an adverse outcome in the case could have had significant implication to its global SSW licensing policy. Further, considering that each medical equipment is highly complex, technical and unique, it was a particular challenge to explain the concept of SSW to the Court. Overcoming these challenges, Kim & Chang was able to obtain a successful outcome for Siemens Healthineerss by identifying the errors in the legal principles on which the KFTC’s decision was based and by showing that the KFTC had failed to prove with sufficient and objective evidence (i) what constitutes customary trade practice, (ii) whether there was any unfair discriminatory treatment and (iii) whether there was any anti-competitive effect.
The Court also agreed that Siemens Healthineers’ SSW is intellectual property, the rights of which are protected under the Korea’s Constitution and the Copyright Act, and at the same time established a precedent limiting the scope of what constitutes an abuse of market dominance.