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Practice Notes

IP High Court Upholds First Award of Punitive Damages for Willful Patent Infringement

In a late October 2024 ruling, the IP High Court of South Korea upheld the main legal findings of a Busan District Court decision to award punitive damages for willful patent infringement. The case involved alleged infringement of the plaintiff’s patent on a lid for a vacuum cooking pot. The Busan District Court’s decision was noteworthy as it marked the first application of punitive damages since their introduction in a 2019 amendment to Article 128(8) of the Patent Act, which allowed courts to award punitive damages of up to three times the actual damages.   A subsequent amendment, which came into effect in August 2024, has since increased the possible punitive damages cap to five times the actual damages.  Against this backdrop of a pro-patentee legislative push, attention has turned to the courts, which have previously been cautious in awarding punitive damages. The IP High Court’s ruling in this case (no. 2023na11276) may signal a shift to a more assertive approach, aligning with legislative efforts to strengthen patent enforcement in Korea.  ▒  Timing of Infringing Acts  A key question in the case concerned timing: the defendant’s infringing acts spanned both before and after the 2019 amendment, raising the question of whether any of the acts were subject to punitive damages. Supplementary Provisions to the amendment state that the new provision “shall apply from the first violation occurring after this Act takes effect.” Relying on this, the defendant argued that the new punitive damages provisions should not apply because their infringing acts began prior to the amendment, and are thus not a first infringement occurring after the act took effect. The IP High Court upheld the lower court’s decision in rejecting this argument, holding that punitive damages apply to any infringing acts that continued after the amendment took effect on July 9, 2019, regardless of when the infringement first began. The court emphasized that allowing infringers to evade the heightened damages simply because their actions initially began before the law was amended would contradict the legislative intent behind introducing punitive damages, which was to deter infringement and strengthen relief for victims.   ▒  The Willfulness Determination The threshold for applying the punitive damages provision is whether the infringement was willful. In addressing whether the defendant’s infringement was willful, the court conducted a comprehensive assessment of the facts, including the history of the parties' relationship:                                                                                                                                                                                                    ●  The plaintiff and the defendant had initially attempted to negotiate a non-exclusive license for the plaintiff’s patent, but after negotiations broke down, the defendant nonetheless proceeded with sales.   ●  The plaintiff repeatedly contacted the defendant regarding the matter, including issuing a cease-and-desist letter, which the defendant ignored.   ●  The parties had also unsuccessfully attempted mediation through the Korea Fair Trade Mediation Agency.   ●  The defendant filed both an invalidity trial and a scope confirmation trial concerning the plaintiff’s patent, but lost in both cases, including on appeal.                                                               The court concluded that the defendant was plainly aware of the patent and that its ongoing sales, despite explicit warnings and legal defeats, showed clear willfulness. The court also dismissed the defendant’s defense that it was genuinely uncertain about the patent’s validity, noting that this defense was contradicted by the defendant’s own prior conduct. The IP High Court’s analysis on this question brings further clarity on how courts will approach willfulness going forward, and highlights the types of evidence patentees should gather and present to demonstrate willfulness.  ▒  Increased Punitive Damages The court of first instance had awarded punitive damages of 0.5 times the actual damages for the willful infringement that occurred after the amendment. While the IP High Court reduced the overall amount of actual damages, it increased the proportion of punitive damages, awarding damages for the post-amendment period totaling double the actual damages (i.e., actual damages + punitive damages equivalent to 1X the actual damages). Under Article 128(9), courts must consider eight factors in determining punitive damages:   1.  Whether the infringer holds a dominant position;   2.  Whether the infringer was aware the act would cause harm to the patentee;   3.  The scale of such harm to the patentee;   4.  The resulting economic benefits to the infringer;   5.  The frequency and length of the infringing acts;   6.  The criminal sanction for the infringing acts;   7.  The infringer’s financial status; and   8.  The efforts the infringer has made to reduce the harm to the patentee. Applying these factors, the court found:   ●  The defendant, being significantly larger than the plaintiff, held a dominant position (factor 1).   ●  The defendant was on notice of the infringement and failed to take steps to reduce the harm to the plaintiff (factors 2 and 8).    ●  The defendant gained substantial economic benefits and maintained a strong financial position (factors 4 and 7).    ●  The infringement was prolonged, lasting over three years and involving substantial sales during the punitive damages period (factor 5).                                                                                               Although the court did not explicitly weigh the factors or indicate exactly how they influenced the final calculation, it did note that no specific evidence was provided regarding factors such as the exact scale of harm (factor 3) and related criminal penalties (factor 6), which may have weighed against a higher punitive award.  ▒  Toward Strengthened Patent Enforcement  The IP High Court thus not only affirmed the lower court’s main findings on the applicability of punitive damages, but also increased the punitive damages multiplier. Further, throughout its judgment, the court repeatedly emphasized the legislative intent of deterring willful infringement. This judgment may open the door to more frequent and more expansive punitive damage awards from other courts, and suggests that the judiciary is ready to shift away from its passive stance and begin to more actively follow the efforts of the legislature. With the newer amendment now also allowing for quintuple damages for infringing acts occurring after August 24, 2024, this trend bodes well for patentees in Korea.

2024-11-12
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Practice Notes

Statistics on Patent Applications in Korea Related to Fourth Industrial Revolution Inventions

The Korean Intellectual Property Office (hereinafter, KIPO) has released statistical data on the trends of patent applications in Korea related to inventions associated with the Fourth Industrial Revolution (hereinafter, 4IR), such as artificial intelligence. This data was prepared by the Artificial Intelligence & Big Data Examination Division of KIPO and was last updated on 23 May 2024  ▒   Fourth Industrial Revolution related Inventions The KIPO classifies the 4IR related inventions into eight major technology fields: Artificial Intelligence (AI), Big Data, Internet of Things (IoT), Digital Health Care, Bio Markers, Intelligent Robots, Autonomous Driving, and 3D Printing. Patent applications filed in the 8 major technologies fields have continuously increased (7,057 appl. in 2013 → 24,341 appl. in 2022).                                    Especially, patent applications filed in the AI field have accounted for the largest (36.8%) among the ones filed in the 4IR technologies fields in 2022. The patent applications filed in the AI field sharply increased by 39.6 % on annual average basis (444 appl. in 2013 → 8,960 appl. 2022).                                                                         ▒  Korean Patent Applications Trend in the Digital Convergence Field The KIPO considers inventions that combine two of the eight major technology fields related to the 4IR as belonging to the Digital Convergence Field. Specifically, combinations such as Artificial Intelligence (AI) + Digital Health Care, AI + Big Data, Internet of Things (IoT) + Big Data, Digital Health Care + IoT, AI + IoT, AI + Autonomous Driving, Digital Health Care + Intelligent Robot, Digital Health Care + Big Data, AI + Intelligent Robot, Autonomous Driving + Intelligent Robot, and IoT + Autonomous Driving are categorized under the Digital Convergence Field. Patent applications filed in the digital convergence field increased by twentyfold between 2013 and 2022 (128 appl. in 2013 → 2,294 appl. in 2022).                                 In particular, the trend of AI technology converging with other technologies has become especially pronounced. Among the 11 convergence technologies, those combined with AI have all shown an average annual growth rate of over 40%. Over the past 10 years, patent applications involving AI convergence have grown by a factor of 41.                                                                                      

2024-10-31
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Practice Notes

KIPO Announces 2025 Budget: AI-based Examination Support Service on the Horizon

The Korean Intellectual Property Office (KIPO) has announced its proposed budget for 2025, revealing the office’s key investment priorities for the coming year. Among other objectives, the budget proposal highlights KIPO’s continuing efforts to effectively integrate artificial intelligence (AI) into its work processes.  ▒  Key Focus Areas for 2025 The total budget of KRW 705.8 billion (approx. USD 511 million) represents a 0.6% increase from the previous year, and is set to be finalized by the National Assembly in December. Through the proposed budget, KIPO outlines four key focus areas for 2025: Leveraging patent big data: Expanding the use of global patent big data to better support national R&D planning, advance the development of emerging technologies, and prevent technology leaks. IP financing for startups and SMEs: Increasing support for IP-based financing options to help small and medium-sized enterprises (SMEs) and startups leverage their IP for growth. Strengthening export companies’ IP dispute resolution: Enhancing the capacity of Korean export companies to prevent and resolve IP disputes in other countries, and expanding efforts to curb the distribution of counterfeit goods online by harnessing AI. Developing a high-quality, AI-based examination support service: Building on KIPO’s partnership with LG AI Research to develop improved AI-based search capabilities for providing faster and more efficient examination services. The latter AI project is in keeping with KIPO’s ’23-’27 roadmap for AI technology implementation, adopted in early 2023, which maps out the office’s ambition of “building the world’s best AI-based examination and trial system”.  ▒  Partnership with LG AI Research KIPO initially partnered with LG AI Research in 2023, with the goal of developing a ‘patent expert AI’ for use in prior art searches, classification, and summarization of patent documents. This lead to the development later that year of what is, according to KIPO, the world’s first hyperscale AI language model tailored specifically for patent administration. The model was trained with 1.78 terabytes of patent-related data provided by KIPO—including patent gazette publications, office actions, machine-translated documents, CPC classifications, machine reading comprehension information, and collections of consultation case studies—based on LG AI Research’s hyperscale multimodal AI, EXAONE. Designed with 8.8 billion parameters, tailored to the environment and usage needs of KIPO, the model has already been successful in handling tasks such as patent document summarization, translation, and classification.  ▒ Applying the new model 2025 will see the beginning in earnest of the next phase of the model’s development and application: building KIPO’s AI-based examination support system, through which the office ultimately plans to introduce new AI-based prior art search and trademark/design image search capabilities into its examination processes. Given the increasing volume and complexity of patent applications, prior art search in particular is an area that stands to benefit greatly from the use of AI tools. As the first such tool based on an AI language model tailored for patent administration tasks, and boosted by the new investment, the model developed by KIPO and LG AI Research promises a step forward in this regard. Although 2025 is only the beginning of the next phase, patent applicants in Korea, as well as PCT applicants using KIPO as International Searching Authority, can look forward to more efficient, speedier, and more reliable services in the near future. Written by Simon Voget

2024-10-28
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Practice Notes

Tackling the increasing delay in Korean trademark examination

As anyone with recent experience of filing trademarks in Korea will already be painfully aware, the examination timeframe has been increasing significantly. In a recent paper published by the Korean Intellectual Property Office (KIPO) and Korea Institute of Intellectual Property (KIIP) (“상표심사처리기간 지연의 경제적 피해액 추정”, August 2024), this topic is discussed in relation to the economic impact caused by trademark examination delays. The majority of data in this article is taken from said paper. For business owners, delays in achieving trademark registration can have severe implications. With Korea being a first-to-file jurisdiction with rights largely based on registered trademarks, there is an inherent risk in using a trademark prior to registration. However, delaying product launches while waiting for examination results leads to lost potential sale opportunities, and if a trademark has to be changed due to a conflict this can also result in costs wasted on product development, marketing etc. Aside from these direct impacts, there are also knock-on effects such as job losses and reduced production while companies delay launching projects, as well as a more general reluctance to innovate and invest in new ventures due to brand uncertainty.  ▒  Causes for the increasing delay The annual number of trademark applications filed and average examination time (i.e. time between filing and examination result) over the last decade is shown in the below table, with the year-on-year percentage difference in brackets: (* Figures for 2024/2025 are estimates) While the number of trademark applications has steadily grown, the increase in examination time is disproportionate. Comparing the 2014 figures with estimated 2024 figures, the number of applications is expected to increase by 69.39% over the 10-year period, while the examination speed is projected to be 200% slower. The increasing delay is primarily attributable to two factors: (1) Lack of manpower The increase in the number of trademark applications was not matched by a corresponding increase in examiners, resulting in a larger caseload per examiner and bottlenecks in examination. The number of trademark examiners increased from 146 in 2019 (~1,500 cases per examiner), to 149 in 2021 (~1,900 cases per examiner), to 175 in 2024 (~1,550 cases per examiner). (Source: Seoul Economic Daily) While the number of examiners has increased, there is still a significant backlog of cases awaiting examination. (2) Increase in requests for accelerated examination A surge in accelerated examination requests diverted resources from general examination. The number of requests grew astronomically from 6,186 in 2018 to 46,744 in 2023 — a more than seven-fold increase over a five-year period. This is mainly attributable to requests for accelerated examination being accepted based on a senior trademark search report prepared by a KIPO-designated agency starting from July 2019. This greatly reduced the burden in requesting accelerated examination and made it easier for applicants to get their applications examined quickly, even if they had no clear intention to start using the mark.  ▒  What can be done? The paper proposes a number of measures aimed at improving the situation: (1) Increasing the number of examiners (2) Utilizing AI to strengthen pre-examination This could include easing examiner burden by implementing an AI-powered similar trademark search engine for use during examination, and improving applicant confidence by developing a pre-filing screening tool that can estimate the chances of a trademark achieving registration. (3) Improving applicant communication This includes increasing awareness of the designated goods/services list that is updated annually (applications only covering pre-approved goods/services are afforded lower official fees and are not likely to be refused based on vague/broad descriptions or misclassification), and alerting applicants of the estimated timeframe for examination. (4) Restricting accelerated examination In response to the surge in requests, KIPO has already stopped accepting accelerated examination requests based on trademark search reports as of January 2024. In order to request accelerated examination, applicants must now rely on other grounds such as (i) they are already using the mark or have evidence showing imminent use is planned; (ii) another party is already using the mark for identical/similar goods; (iii) the applicant received a warning letter concerning their application from another party with senior rights, etc. (5) Shortening the opposition period Even if an application passes examination (i.e. the examiner finds no grounds to provisionally refuse the application), it is still subject to a two-month “publication period” during which any party can file an opposition with the intention of preventing the application from achieving registration. It has been suggested that this period be reduced to 30 days, which would allow non-opposed applications to be registered faster. (In return, opponents may be afforded longer time extensions for preparing their opposition.)  ▒  Final thoughts As discussed, increasing delays in trademark examination can have significant economic impacts, hindering business growth and innovation. With KIPO intimately aware of this situation, we are hopeful that changes will be forthcoming to improve efficiency and bring about a return to a more predictable and business-friendly​ trademark examination system.   Written by Jonathan MASTERS

2024-10-18
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