IP Insights

Introduction of Punitive Damages for Patent and Trade Secret Willful Infringement in Korea – Effective as of June, 2019

On December 7, 2018, the Korean National Assembly passed bills to revise the Korean Patent Act and the Unfair Competition Prevention and Trade Secret Prevention Act to include punitive damages award against willful violations.  These bills will be enacted into laws as early as June of 2019.

According to the revised Article 128, paragraphs 8 and 9 of the Korean Patent Act, those who knowingly or willfully infringe another party’s patents will be liable for up to three times the amount determined as damages. Some of the factors considered in determining enhanced damages are: whether the infringer possesses domineering status over the patentee, the degree of willfulness, the duration and frequency of the infringing act(s) and the degree of economic gain of the infringer from the infringing act(s).

The courts currently calculate damages in consideration of the factors, namely the claimant’s lost profits, the infringer’s profits from the infringement, and reasonable royalty, as set forth by the Korean Patent Law.  However, the current compensation system has been criticized by the industry for the damages award being insufficient to properly compensate the IP right holders for their loss and also to penalize those who abuse the current system.  According to a study conducted by KIPO, the median value of damages awarded in patent infringement lawsuits in South Korea during the period of 1997-2017 stood at 60 million won ($53,121), whereas the corresponding figure for the United States was 6.57 billion won ($5.82 million).  Even considering the size of both markets, the imbalance of damage awards is too great and the bills are expected to address this imbalance.

Meanwhile, the Korean Unfair Competition Prevention and Trade Secret Protection Act was also amended similarly to allow punitive damages for willful infringement of trade secret.

This introduction of enhanced damages for willful infringement will reinforce the protection of intellectual property in South Korea and will require parties to be more cautious in practicing the intellectual property rights of others.  Although there is little guidance as to how courts should go about evaluating willfulness and enhanced damages at this time, obtaining a non-infringement and invalidity opinion from the outside counsel may minimize exposure to enhanced damages by showing that the practitioner had a good-faith belief of non-infringement and patent invalidity.