On December 7, 2018 the Korea National Assembly approved a bill to amend the Patent Act and the Unfair Competition Prevention and Trade Secret Protection Act (“UCPA”). Highlights of the proposed amendments include stronger penalties for patent infringements and further relaxation of the burden of proof for patent holders. The amendments are expected to be effective in July 2019.
Willful infringers to face treble damages
The latest amendment to the Patent Act and the UCPA adopts a punitive damages system whereby compensation for damages arising from willful infringement of a patent may be awarded to a prevailing patentee in amounts up to three times the compensatory damages. In determining the actual amount of damages, the amendment bill requires the court to consider factors that closely relate to the infringer’s intent. For example, the court will not only be actively considering the economic gain achieved through infringement, the extent of damages, the period over which the infringing act occurred, the frequency of the infringing act, and the infringer’s effort in remedying the patent holder’s damages, but also the infringer’s superior bargaining power, financial condition, and degree of awareness regarding culpability and risk of damage.
Relaxing of burden of proof of infringement
Another important amendment to the Patent Act includes further alleviating the patent holder’s burden of proof when claiming infringement. Traditionally, patentees in Korea have often faced difficulties in proving infringement, especially if the accused product or process is not publicly available (and in most cases, infringers hold key evidence of infringement). The lack of a US-style discovery process exacerbates patentees’ difficulty in proving infringement in Korea. The Korean Civil Procedure Act allows a patentee to request a court to order the alleged infringer to produce relevant documents, but in practice, the alleged infringers are able to avoid production by asserting that the requested documents contain trade secrets and simply refusing to produce them. Thus, patentees have often been unable to gather sufficient information about the accused product or process that can prove infringement or damages.
To address this difficulty, the Patent Act was amended in 2016 to allow the court, upon the patentee’s request, to compel the alleged infringer to submit documents, including materials necessary for proving infringement or damages. However, due to the trade secrets defense, this amendment has not been actively used by the courts and patentees still face much difficulty in securing the relevant documents and materials, especially for patents related to production methods.
In light of the ongoing difficulties, the National Assembly approved the amendment bill provisions allowing courts to compel the alleged infringer not only to produce the relevant documents and materials, but also to disclose the specific information about the accused product or process. Under the amendment bill, as long as a patentee can specifically prove the existence of infringement with reasonable probability, then the alleged infringer denying infringement has the obligation to produce specific information about the element/composition of the accused product or process. If the alleged infringer cites a valid reason for not making such production, the court may order the alleged infringer to submit relevant documents and materials to determine whether the alleged infringer actually has a valid cause for non-production. The amendment bill allows the court to deem the patentee’s allegation true if the alleged infringer does not have a valid cause.
Although this latest amendment to the Patent Act alleviates patentees’ burden of proof by no longer allowing alleged infringers to avoid liability by simply denying a patentee’s allegations, the practical meaning of this amendment remains unclear as the alleged infringers would still be able to refuse production of the relevant documents and materials as long as there is a valid cause for non-production.
UCPA to relax standard for defining trade secret and impose harsher criminal punishment
The latest amendments to the UCPA include further relaxation of the standard for defining trade secrets. Under the current UCPA, the term “trade secret” includes production methods, sales methods or other useful technical or business information, which information is not known publicly, has independent economic value and has been maintained confidential through “reasonable efforts”. The amendment bill deletes the “reasonable efforts” standard and recognizes production methods, sales methods and other useful technical or business information as trade secrets as long as the confidentiality of such information has been maintained. This amendment significantly lowers the threshold for information to become a trade secret and is expected to provide more protection for small and mid-sized businesses that were unable to meet the “reasonable” maintenance standard required under the current UCPA.
The UCPA’s penal provisions have also been amended; for example, the amendment bill expands the types of acts that would constitute a misappropriation of trade secrets from including not only “the acquisition, use, or disclosure to a third party, of trade secrets,” but also “disclosure of trade secrets beyond the permitted scope” and “refusal or avoidance of a trade secret holder’s request to delete or return such trade secrets, or retention of copies of trade secrets even after the permission to use or maintain such trade secrets has expired”.
Further, under the latest amendment to the UCPA, harsher criminal penalties will be imposed by increasing prison terms and fines (e.g., using trade secrets outside of Korea or using them knowing that they will be used outside of Korea will now be subject to not more than 15 years of imprisonment or a fine of 1.5 billion won, whereas pre-amendment penalties were not more than 10 years of imprisonment or a fine of 100 million won).
In light of these new amendments to the Patent Act and the UCPA, stronger sanctions against technology extortion are expected, providing wider protection to patent holders and trade secret holders in Korea.
Lee & Ko’s IP Practice Group has significant experience and expertise in IP cases and disputes, representing and defending corporate IP rights, seeking remedies against infringement, and responding to infringement claims. Lee & Ko is uniquely positioned to provide client-centered services for such legal issues and disputes.