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| IP Newsletter | Winter 2013/14 |
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PATENT |
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Restrictive Covenants from Exclusive Patent License Agreements Must Be Recorded with KIPO |
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Exclusive patent licenses may sometimes come with certain restrictive covenants (e.g., certain sales territory, exclusive period, place of manufacturing, or products). However, these restrictive covenants must be recorded with the Korean Intellectual Property Office ("KIPO") in order to be enforceable through patent laws. |
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In other words, if an exclusive licensee breaches an unrecorded restriction, the patentee may not seek enforcement through a patent infringement action. Instead, the patentee must rely only on remedies available for breach of contract. Significantly, criminal sanctions or injunctions may not be as readily available in a breach of contract claim. |
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The Supreme Court affirmed this legal principle in a recent patent infringement action filed against an exclusive licensee. In this case, the exclusive license along with several restrictive covenants were recorded with KIPO (e.g., exclusive period, territory of exclusivity, and the rights to manufacture, sell, lease, import and offer to sell, products covered by the license). However, the patentee failed to record the requirement that the exclusive licensee not use the patent without obtaining prior approval from the patentee. The patentee subsequently filed a criminal complaint against the exclusive licensee arguing that the Patent Act was violated since the licensee used the patent without obtaining prior approval from the patentee. Since the requirement for seeking prior approval was not recorded with KIPO, the Supreme Court found that the restrictive covenant had no effect under Korean patent law (Article 101, paragraph 1). Thus, the Supreme Court held that there was no patent infringement. |
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This decision has solidified the importance of properly recording all restrictive covenants from exclusive licenses as a prerequisite condition for taking effect under Korean patent law.1 Accordingly, we recommend that all recordable restrictions from an exclusive license be carefully recorded with KIPO so that the patentee will have the option of bringing a patent infringement action if the licensee breaches the restrictive covenant. |
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1 Please note that some restrictive covenants may not be recordable with KIPO. There are no published guidelines regarding covenants which are not recordable. However, in general, covenants inconsistent with the rights and obligations of the patent law are not recordable. |
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If you have any questions regarding this article, please contact: |
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For more information, please visit our website: www.ip.kimchang.com |
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