IP Newsletter | Spring 2015
	PATENT
	No Refund of Previously Paid Royalties Even After Patent is Invalidated
	Under Korean patent law, a patent that is finally invalidated is legally considered never to have been filed at all. However, in a recent case involving a dispute over a patent licensing agreement where the patent was finally invalidated after the agreement was executed, the Supreme Court ruled that the patentee had no obligation to refund royalties already paid by the licensee prior to the invalidation, nor was there any basis to retroactively revoke the agreement, as long as the license was enforceable prior to the invalidation (Supreme Court Decision No. 2012 Da 42673, rendered on November 13, 2014). In the above case, the Court focused on the practical question of whether or not the parties were able to perform under the license agreement prior to the final invalidation. The Court determined that the answer was yes, because during that time, the patentee would not have been able to enforce the patent against the licensee, and no third party was allowed to use the patent in violation of the exclusive right given to the licensee. Further, the Court found no reason to revoke the agreement on the basis of a mistake or misunderstanding, because invalidation is possible for every patent, and the licensee necessarily must have understood this when entering into the license agreement. Thus, the Court affirmed the validity of the license agreement prior to the date of final invalidation, despite the legal construct that an invalidated patent is considered to have never existed. However, since the license could not be enforced after the invalidation, any royalties paid after the date of invalidation were required to be returned. The Court did leave open the possibility that if a patent's validity had been an explicit condition of enforcing or executing the agreement, or if the patent itself could not have been practiced prior to the invalidation, the license might be considered invalid and all royalties refundable. However, this decision's main holding can be used to support the efforts of patentees/licensors to license their patents in Korea by affirming that royalties received under a valid license agreement are lawful profits to the licensor even if the patent is later invalidated.
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