IP Newsletter | Winter 2018/19
	PATENT
	Korea Adopts Treble Damages for Patent Infringement and Trade Secret Misappropriation Beginning July 9, 2019
	On December 7, 2018, the National Assembly approved proposed amendments to the Patent Act (the "Patent Act Amendment") and to the Unfair Competition Prevention and Trade Secret Protection Act (the "Trade Secret Act Amendment," collectively the "Amendments"), which include new provisions for awards of up to treble damages for certain acts of patent infringement or trade secret misappropriation. The Amendments were officially announced on January 8, 2019, and will become effective on July 9, 2019. Some key changes are highlighted below.
	1. New provision for treble damages for intentional or willful infringement/misappropriation (new Article 128, Paragraphs 8 and 9 of the Patent Act, new Article 14-2, Paragraphs 6 and 7 of the Trade Secret Act)
	The current Patent Act and Trade Secret Act only allow a patent or trade secret owner to claim actual damages for patent infringement or trade secret misappropriation. In practice, this has led to relatively low damages awards in Korea, even for knowing acts of infringement or misappropriation, and damages awards for patent infringement or trade secret misappropriation often have not been high enough to effectively discourage such infringement or misappropriation.
	However, under the Amendments, courts are now authorized to award damages as a punitive measure of up to three times the amount of actual damages for intentional or willful acts of infringement/misappropriation.
	When calculating the amount of such punitive damages, courts are instructed to consider the following factors: (i) whether the infringer has a dominant position; (ii) whether the infringer knew the act of infringement would cause harm to a patent or trade secret owner, or intended such harm; (iii) the significance of any such damages; (iv) the economic benefits to the infringer from the infringement; (v) how frequently and how long the infringing activity was committed; (vi) the criminal penalty for the infringing activity; (vii) the infringer's financial status; and (viii) what efforts the infringer has made to reduce the harm to the patent or trade secret owner.
	These newly-added punitive damages provisions of the Amendments will apply to infringing activities committed after the effective date of the Amendments, as well as to utility model infringement. The newly introduced treble damages provision should improve remedies for patent infringement or trade secret misappropriation, and are expected to contribute to stronger protection of intellectual property in Korea.
	2. "Reasonably expected" royalties as basis for damages calculation (Article 65, Paragraph 2 and Article 128, Paragraph 5 of the Patent Act)
	The current Patent Act calculates royalty damages based on the royalty that would be "ordinarily expected" from an arm's-length license. This has often led to difficulties in royalty calculation where there are not many examples of royalties for a particular technology in the market, or information regarding "ordinary" royalties is not easily available, contributing to the common perception in Korea that royalty damages awards tend to undervalue damages to patentees.
	However, the Patent Act Amendment changes the term "ordinarily expected" to "reasonably expected," essentially allowing courts to calculate a royalty that may be reasonable under the totality of the circumstances, regardless of whether similar royalties have actually been granted.
	The increased flexibility is expected to encourage courts to award larger damages amounts where royalties are the basis for the damages calculation.
	3. Accused patent infringer denying infringement must describe the actual product/process used (new Article 126-2 of the Patent Act)
	Due to the limited discovery that is available in Korea, it can be difficult for a plaintiff to access relevant information regarding infringing activity that takes place within an infringer's premises. Often, an accused infringer will simply deny any infringement on the basis that the plaintiff bears the burden of proof, without presenting any evidence to the contrary, even if the plaintiff has made a prima facie showing that there is a good chance infringing activities are being committed by the accused.
	The Patent Act Amendment makes it more difficult for an accused infringer to simply deny infringement where the plaintiff has shown it is plausible that the infringer is using the patent, by requiring the accused infringer to provide details regarding the product or process it is actually using. If an accused infringer unjustifiably refuses to present such details, the court may presume that the alleged infringer has actually committed the infringing activity claimed by the plaintiff.
	This new requirement applies to patent enforcement actions initiated after the effective date of the Patent Act Amendment, and is expected to make it easier for patent plaintiffs to prove meritorious infringement claims as well as speeding up patent litigation proceedings in general.
	4. Lowered maintenance requirement for trade secrets (Article 2, Item 2 of the Trade Secret Act)
	Under the current Trade Secret Act, a "trade secret" is defined as technical or managerial information useful for business activities which is: (i) unknown to the public (i.e., secret); (ii) has independent economic value; and (iii) has been maintained as secret through "reasonable efforts."
	This third requirement has often been a difficult hurdle in practice, as courts often find that efforts to maintain secrecy have been lacking, particularly for small or medium-sized companies that may have difficulty implementing systematic trade secret protocols. In fact, this requirement was already previously reduced in 2015 (lowering the requirement from "substantial efforts" to "reasonable efforts"), but proving this element has remained difficult even after the change.
	The Trade Secret Amendment further eases the third requirement by deleting the phrase "by a reasonable effort" entirely, effectively meaning that as long as secrecy is simply maintained, the third requirement will be considered met, without reference to the "effort" of maintenance at all.
	It is expected that the Trade Secret Amendment will substantially expand the scope of confidential information that can be protected as trade secrets in Korea.
	5. Stronger criminal penalties for trade secret misappropriation (Article 18, Paragraphs 1 and 2 of the Trade Secret Act)
	The current Trade Secret Act only provides for criminal penalties for acts of acquiring, using or disclosing to a third party the trade secret of another party for the purpose of obtaining an unjust benefit or harming the trade secret owner.
	Under the Trade Secret Amendment, however, the scope of criminally punishable acts has been expanded to include: (i) removing a trade secret from an authorized location to an unauthorized location for the purpose of obtaining an unjust benefit or harming the owner; (ii) continuing to possess another's trade secret after receiving the owner's request to delete or return the trade secret for the purpose of obtaining an unjust benefit or harming the owner; (iii) acquiring a trade secret by theft, deceit, threat or other illegal means; and (iv) acquiring or using a trade secret knowing that it may have been misappropriated.
	Further, the Trade Secret Amendment increases the criminal penalties for trade secret infringement as follows: (i) misappropriation of a trade secret involving use of the trade secret overseas or knowledge that such overseas use will occur generally may be punished with imprisonment of up to 15 years or a fine of up to KRW 1.5 billion (increased from ten years or KRW 100 million); and (ii) all other trade secret misappropriation generally may be punished with imprisonment of up to 10 years or a fine of up to KRW 500 million (increased from five years or KRW 50 million).
	It is expected that the substantially increased criminal penalties under the Trade Secret Amendment will more effectively discourage parties from disclosing or misusing others' trade secrets without authorization.
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