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28 September 2020
In South Korea, the low amount of damages awarded by the courts in patent infringement cases has long been criticised. To address this, a treble damages system (implemented in July 2019) and an improved method for calculating the amount of damages (to be implemented on 10 December 2020) have been introduced. This article looks at these changes in detail as well as a proposed law revision to improve evidence collection.
The treble damages system allows the courts to multiply the proven amount of damages up to threefold in cases of 'intentional' infringement.
Historically, under-compensation was common in patent infringement cases where the true amount of damage incurred was difficult to prove. The courts' ability to now multiply the amount of proven damages alleviates this problem and allows for more effective compensation.
The criterion by which infringement is deemed to be 'intentional' or not will become more apparent as relevant case law emerges, although the multiplier is determined based on the following factors specified in law:
While the administration's intention appears to be punitive compensation, from the perspective that the South Korean civil law compensation system is based on compensatory damages, rather than being punitive, it seems that the new system instead simply makes it more likely that patent owners can effectively obtain compensation sufficient to make up for the damage that they have suffered.
The improved method for calculating damages will allow for a reasonable licence fee for infringement in excess of the patentee's own production capacity.
Under the current law, damages are calculated up to the limit of the patentee's own production capacity, even if the infringer exceeds this limit. For example, if an infringer sold 200 items while it is regarded that the patentee could only have produced 100 items in the same timeframe due to production constraints, the 'excess' 100 items are not included in the calculation of damages. However, the revised law will allow for a reasonable licensee fee to be awarded in such cases, based on the following formula:
Damages = [patentee's production capacity x per-item profit] + [excess x reasonable licence fee].
To better protect patentees, further to the amendments already discussed above, the evidence collection system must be revised to better facilitate the securing of evidence relating to infringement and damages. A revision to the Patent Act relating to the so-called 'K-Discovery' system is currently under review. This is closely linked to the collection of evidence to prove that infringement is 'intentional', a requirement of the treble damages system.
The revision would allow the courts in patent infringement litigation to nominate an expert who, either at the court's ex officio direction or at the request of a party, would have authority to conduct an investigation at the site where infringement takes place (eg, the production facility) to obtain relevant evidence and submit the findings to the court. This may be considered similar to the inspection system available in Germany. While limited in scope when compared with the discovery system of evidence collection in the United States, these proposed changes to allow evidence to be collected at the court's discretion should enable faster resolution of disputes while still keeping litigation costs relatively low.
If the K-Discovery system becomes law, the protection available to patent holders could be strengthened to a much greater degree.
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