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| IP Newsletter | Winter 2014/15 | |
Under the Korean Patent Act ("KPA"), Article 99, where a patent is jointly owned, each co-owner is free to use the patented invention, but no co-owner may assign, license, or subject to attachment its share of the patent without the consent of all other co-owners. This statute serves to protect the value of the other co-owners' interests in the patent, which may be negatively affected if one co-owner's interest is licensed or assigned to a third party who competes with the other co-owner, for example.
However, Case No. 2013Da41578 is noteworthy because the Supreme Court resolved a dispute between joint owners of a patent by applying general property principles to require dissolution of the patent. Under the Korean Civil Code ("KCC"), any co-owner of a jointly-owned property, whether real or personal property, can seek a court order for dissolution of the jointly-owned property if no agreement on the division can be reached among all co-owners. The court, in principle, may order dissolution through division in kind (physical division, or where each co-owner is deemed to hold rights in the property independent of the other co-owners' rights) of the property. However, if division in kind is impossible or impracticable due to the nature of the property, or if the value of the property would be significantly harmed by division in kind, the court may instead order that the property be sold at auction with the sales proceeds divided among the co-owners according to their shares in the property.
In this case, the Court agreed with the co-owner seeking dissolution that dissolution would not be prejudicial to the economic value of the other co-owners' shares in the patent, so there was no basis under KPA Article 99 not to apply general property dissolution rules under the KCC. Further, the Court did not order a division in kind (as impossible or impractical), but instead, ordered that the patent be sold in auction and that the sales proceeds be proportionally divided among the co-owners. The Court thus rejected the other co-owners' argument that sale or disposal of the patent (even pursuant to dissolution) required their consent under KPA Article 99.
The Supreme Court's decision thus indicates that any patent co-owner can seek to end a joint ownership by filing for dissolution of joint ownership with a court. However, since this dissolution is likely to be accomplished through sale of the patent at auction, other co-owners are at risk of being forced to sell their interests in the patent to a third party. To prevent this outcome, companies should seek to avoid co-ownership of patents if at all possible, such as through proper assignment of patent interests to a single entity. If co-ownership is unavoidable, co-owners who wish to avoid forced dissolution may consider entering into an agreement with the other co-owners not to seek or cause division of the patent (for a maximum of five years, per Civil Code Article 268, Para. 1) and recording the agreement in the patent registry.
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Duck-Soon CHANG ducksoon.chang@kimchang.com |
Mikyung (MK) CHOE mkchoe@kimchang.comm |
Seung-Chan EOM seungchan.eom@kimchang.comm |