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IP Newsletter | Summer/Fall 2016
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PATENT
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Korean Court Denies Bulk of Samsung Ex-Employee's Multi-Billion Won Inventor Compensation Claim
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On June 23, 2016, the Seoul Central District Court rendered a decision in favor of a former Samsung Electronics researcher ("Plaintiff") in a lawsuit filed against Samsung Display, which sought KRW 2 billion in compensation for an in-service invention developed by the Plaintiff (Seoul Central District Court Decision No. 2014Gahap512263, rendered on June 23, 2016). The Plaintiff alleged he was actually owed KRW 66 billion (approx. USD 56 million), but made an initial partial claim for KRW 2 billion (approx. USD 1.7 million). However, the Court awarded a total of only KRW 48 million (approx. USD 41,000) for the Plaintiff's entire claim.
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At Samsung Electronics, the Plaintiff invented a technology relating to the electrode array of the lower substrate within an LCD panel (the "In-Service Invention"). The Plaintiff assigned the In-Service Invention to Samsung Electronics, who then registered a patent for the In-Service Invention. The Plaintiff left Samsung Electronics in approximately 2000, and Samsung Electronics began exploiting the In-Service Invention in its "PLS mode" LCD products beginning in 2010. Samsung Electronics spun off its products division in 2012 into Samsung Display, which inherited Samsung Electronics' liabilities for employees' in-service inventions. Samsung Display also asserted the In-Service Invention in a patent infringement suit against LG Display.
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Calculation of the compensation (Plaintiff's vs. Court's)
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The following table compares the methods used by the Plaintiff and the Court in calculating the compensation owed in this case.
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Plaintiff's calculation |
Court's calculation |
| Compensation formula |
Profits earned by Samsung Electronics and Samsung Display from the In-Service Invention [i.e., (Sales revenue from the products) x (Contribution of In-Service Invention to the products) x (hypothetical royalty rate) x (Contribution to exclusivity)] x (Employee-inventors' Contribution) x Plaintiff's contribution among joint inventors) |
Profits earned by Samsung Electronics and Samsung Display from the In-Service Invention [i.e., (Sales revenue from the products) x (Contribution of In-Service Invention to the products) x (hypothetical royalty rate) x (Contribution to exclusivity)] x (Employee-inventors' Contribution) x Plaintiff's contribution among joint inventors) |
| Sales revenue from "PLS mode" LCD products |
January 2010 – October 2018 (expiration of the US patent): around KRW 27 trillion (approx. USD 23 billion) |
January 2010 – October 2017 (expiration of the Korean patent): around KRW 24 trillion (approx. USD 20.3 billion ) |
| Contribution of In-Service Invention to the products |
Plaintiff did not consider this factor. |
5% |
| Hypothetical royalty rate |
2.5% |
2% |
| Contribution to exclusivity |
70% |
6% |
| Inventors' contribution (vis-à-vis Employer's contribution) |
35% |
10% |
| Plaintiff's contribution among joint inventors |
40% |
1/3 |
| Total compensation |
around KRW 66 billion |
around KRW 48 million |
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The Court (i) limited the contribution of the In-Service Invention to the products to 5%, on the basis that only a small part of the finished LCD products exploited the In-Service Invention, and that the sales revenues are largely due to Samsung Display's position in the market and reputation, and recognition of the products by consumers, (ii) found that the contribution of the In-Service Invention to Samsung Display's exclusivity in the market was only 6% based on facts such as that the market share of the newer OLED technology is increasing in the display market at the expense of LCD, and that non-technical factors significantly affect sales of display products. As a result, the Court awarded only about KRW 48 million, rather than the KRW 2 billion claimed by the Plaintiff.
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This case provides an important reference regarding the factors likely to be considered by a court when evaluating potential compensation for an employee in-service invention in Korea, such as the level of contribution of the in-service invention to products and to the employer's exclusivity in the market, and the employees' relative contributions to the invention.
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Both the Plaintiff and Samsung Display have appealed the case, and while the appeals were originally before the Seoul High Court, they have been transferred to the Patent Court in accordance with the recently-amended Civil Procedure Act and Court Organization Act, which now give the Patent Court exclusive appellate jurisdiction over most intellectual property disputes, including patent rights. Since the Patent Court has not previously heard employee invention disputes, it will be interesting to see whether the Patent Court agrees with the weighing of factors in the first instance decision.
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