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Introduction of Punitive Claims for Damages in Willful Patent Infringements

Introduction of Punitive Claims for Damages in Willful Patent Infringements

Regarding the requirements for compensation for damages due to an illegal act of patent infringement, in the past, Korean patent law did not focus on whether such an act was caused intentionally or accidentally since ‘intentionally or accidentally’ were regulated under patent law as being equivalent. In other words, earlier Korean patent law did not have compensation for damages regulations based on punitive compensation for damages such as in American patent law.

However, the revised Korean patent law, which came into force on July 9, 2019, has introduced a punitive compensation for damages system in which the Court can decide the amount of compensation for damages up to 3 times the maximum amount recognized as damages in the case that a patent infringement act is determined to be an intentional act (Article 128 (8) of the revised Patent Act). This revised law is expected to bring into effect provision of an actual means of relief to a right holder and also help restrain acts of patent infringement. Accordingly, it is anticipated that infringement lawsuits will increase due to the active exercising of rights.

Also, one should be careful to note that that the punitive compensation for damages regulation also applies to acts of infringement of utility models; however, such regulation only applies to acts of infringement occurring after the enforcement date, July 9, 2019.

Meanwhile, in practice, infringement lawsuits have tended to focus on the existence or lack of existence of an infringement act but have not involved quality debate regarding the amount of compensation for damages. However, it is anticipated that the amount of compensation for damages will be intensely debated in the future due to the introduction of this punitive compensation for damages system.

The revised law regulates that the amount of punitive compensation for damages should be decided by considering ① possible superior status of an infringer after an infringement, ② whether the infringer was aware of the infringement act and/or whether such act was done intentionally, ③ the scale of damages to the patentee caused by the infringement act, ④ the infringer’s economic gain due to the act of infringement, ⑤ the time period and number of infringement acts, etc., ⑥ the prescribed penalty for the infringement act, ⑦ the infringer’s financial status and ⑧ the effort the infringer puts into damage relief (Article 128 (9) of revised Patent law). Going forward, it is considered that actual applied examples of such standards will be established by the Korean Court.

Further, for the purposes of compensation in relation to the basic standard of a maximum of 3 times damages, specific methods for calculating the amount of damages that exist are expected to be more actively dealt with compared to before the revised law came into effect. For example, various precedents will likely be established in the future in relation to distinguishing between fixed costs and variable costs, calculation of limited profits, legal computation principles for percent contribution and specific calculation of percent contribution, etc.

Especially, whether a patent infringement act was done ‘intentionally’ or not will be a main topic of litigation in the future. Accordingly, corporations who are utilizing patent rights, etc. in their businesses should prepare evidential documents proving lack of intention in advance (for example, in the case that there are similar prior technologies, arguments that no infringement occurred will need to be prepared through external objective institutions), and in the case that there is a risk of infringing revealed by a prior arts search, one can proactively take the procedure of acquiring a license after consulting with the right holder so as to reduce the risk of intellectual property infringement.

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