The Korean IP environment

Figure 1. Application by type of IP right (Unit: cases)

In 1949 only 200 patent applications were filed in Korea; this figure rose to 5,000 in 1980 and to 100,000 in 2000. However, in the past 13 years it has doubled to over 200,000. The rise has been driven mainly by rapid economic growth, together with the technological innovation that has taken place in Korea during this period. According to the World Intellectual Property Organisation, Korea ranked first for six consecutive years (from 2007 to 2012) with respect to the number of resident patent applications filed per gross domestic product and capita.

Applications

Based on statistics from the Korea Intellectual Property Office (KIPO), the total preliminary number of IP rights applications – including patents, utility models, designs and trademarks – submitted to KIPO in 2013 was 430,164 – a growth of 8.4% year on year. Figure 1 shows that filings of applications for patents, trademarks and design applications increased, with applications for utility models falling.

The number of trademark applications filed in 2013 totalled 147,667 – an 11.4% increase year on year, which was the highest growth rate among all IP rights. The number of patent applications filed in 2013 was 204,859 – an increase of 8.4%. Applications for utility models fell by 11.7% to 10,968, while applications for designs rose by 6% to a total of 66,940. In particular, the increased applications for trademarks and designs reflect the competitive business environment and levels of IP litigation around the world.

Although the figures for 2013 are preliminary, about 85.7% of IP rights applications were filed by domestic applicants. Among those domestic applications, about 16.3% were from 10 major companies in Korea. With respect to patents, 20.8% of applications were filed by 10 major companies, with the top five being Samsung Electronics, LG Electronics, Hyundai Motors, LG Chem and Hyundai Heavy Industries.

Foreign applicants filed 61,322 applications in 2013, accounting for 14.3% of the total number of IP rights applications. As in 2012, the greatest number of foreign applications in 2013 were filed by Japanese applicants, followed by US applicants – together accounting for over half (about 63.2%) of all foreign applications. The top 10 foreign companies are four Japanese companies, three US companies, two German companies and one French company. Qualcomm Inc (US) is ranked first, with Apple Inc (US) second, Canon (Japan) third, Robert Bosch GmbH (Germany) fourth and Tokyo Electron Ltd (Japan) fifth.

Table 3 lists the top six technology fields of patent and utility model applications filed in 2013. With regard to patents, the listed fields comprise 55.9% of all technological fields. Foreign applicants tend to focus more on chemical fields than domestic applicants.

Registrations

According to KIPO’s overview of IP examination trends, registration rates are also gradually rising. With regard to patent applications, the registration rate was 60.4% in 2009, increasing to 67.2% in 2012. Figure 2 shows registration figures by type of IP right.

Figure 2. Registration by type of IP right (Unit: cases)

The registration trend for IP rights in Korea shows an increase for four consecutive years since 2010. Similar to the filing of IP rights applications, the number of trademark registrations reached 100,092 in 2013 – a growth rate of 28.5% – while the number of patent registrations reached 127,330, a growth of 12.2% year on year. Registrations of utility models fell by 6.2% to 5,959, while design registrations increased by 2.5% to 47,308.

Figure 3. Registrations of IP rights applications filed by foreign applicants

Similar to filings of foreign applications, registrations of IP rights applications filed by Japanese and US applicants amounted to 62% of total foreign registrations.

Examination period

KIPO sets targets for the pendency of each IP right at the start of each year and applies various methods to reach those targets. Based on KIPO’s statistics overview of IP examination trends and 2013 Annual Report, the average first action pendency for 2013 was 13.2 months for patents and utility models, with shorter periods for trademarks (7.7 months) and designs (7.4 months). Compared to the 2012 figures, pendency was reduced by 1.6 months for patents and utility models, 1.2 months for trademarks and 1.4 months for designs.

KIPO is renowned for providing the fastest examination of IP rights applications in the world and has maintained its lead by continuing to reduce pendency periods.

KIPO has announced that its decision to outsource prior art searches played a significant role in the overall reduction of its examination pendency. Further, to reduce first action and examination pendency, KIPO is continually employing more examiners. As of 2013 KIPO’s examination personnel totalled 732 for patents and utility models and 160 for trademarks and designs.

Figure 4. Average total pendency

Patent litigation trends

From 2009 to 2013, the success rate of rights holders in infringement suits before Korean district courts involving patents or utility models was 27.6%, with 33% of requests for injunctions being granted. The slightly higher success rate for injunctions may well be due to the fact that the burden of proof required for an injunction is relatively low compared to that in a patent infringement suit. However, the difference between the two has narrowed over the past few years. In one recent example the Suwon District Court was asked to issue an injunction – the court considered the doctrine of equivalents, indirect infringement and invalidity issues to determine whether the patent in question had in fact been infringed. Previously, the courts have not always been so stringent – which goes some way towards explaining why the gap between success rates in infringement litigation and in requests for injunctions continues to narrow.

Figure 5. Success rate of patentees (patent/utility models) in Korea district courts

Source: Analysis of patent infringement litigation decisions for damage system reform, Kwansik Kim

Patentees lost their infringement cases because the patent was found not to have been infringed in 49.8% of cases and because the patent was found to be invalid in 39% of cases; 8.3% cases failed because of freedom to operate issues. In petitions for injunctions, the reasons that the court gave for refusing a patentee an injunction were non-infringement (55.6%) followed by invalidity (28.4%) and freedom to operate (3.2%). Generally, the reasons for a plaintiff losing an infringement case tend to be non-infringement, patent invalidity, freedom to operate and licences. In addition, sometimes the plaintiff was not the legitimate owner of the patent or no damages were inflicted, even though the patents had been infringed. With regard to injunctions, the grounds for refusal include the following:

• A settlement had already been confirmed;
• Insufficient evidence was presented; or
• No articles or goods were specified in the request.

The success rate of foreign companies against large Korean companies in infringement cases is extremely low (5.9%); they tend to do better against Korean small to medium-sized companies (34.9%). When large Korean companies are the plaintiffs, their average success rate is 33.3%. Domestic small to medium-sized companies lost all of their 20 cases against large domestic companies. This was unexpected, especially given that the success rate of these small to medium-sized companies was 28.6% against similar companies and 25% against foreign companies.

With regard to injunctions, large Korean companies were granted injunctions in three out of five cases against domestic small to medium-sized companies – a success rate of 60%. Domestic small to medium-sized companies won only four out of 16 cases against domestic large companies. This might be a result of larger companies having more skills, experience, human resources and technology.

Damages measures in Korea

Articles 128(1) to (5) of the Patent Law provide various methods for calculating damages in patent infringement cases.

From 2009 to 2013, damages were most commonly awarded at the judge’s discretion under Article 128(5). Lost profits were the second most common type of damages awarded (28.3%), while a reasonable royalty was rarely awarded.

In order to compare the damages awarded in Korea to those awarded in other countries, such as the United States or Japan, Table 12 lists only lost profits and reasonable royalty.

Amount of damages awarded to plaintiffs

From 2009 to 2013, the average amount of damages awarded to domestic companies was $330,590 – six and a half times less than the average award made to foreign companies, which was $2,149,080. The total number of cases actually adjudicated and resulting in damages being awarded was 52 for domestic companies and eight for foreign companies. It is likely that such cases involved foreign companies litigating against domestic companies and winning damages when there was a strong infringement case, which may well account for the difference.

The figures show that while foreign companies often succeed against domestic small to medium-sized companies, they do not prevail as often against domestic large companies. These tended to receive about 100 times more damages against similar-sized Korean companies than small or medium-sized companies – perhaps due to the quantities of goods involved or the type of service at issue.

In 2009 a US federal district court ordered Abott Laboratories to pay Centocor Ortho Biotech Inc $1.848 billion in damages; by contrast, the highest damages awarded in Korea between 2009 to 2013 was $13 million, while the highest award made in Japan during the same period was $18 million.

In Korea, there is some movement towards reforming the Patent Law with regard to damages (including statutory, punitive and treble) for IP infringements. However, it will take some considerable time before any such changes are apparent in the decisions of Korea’s courts.