CONTENTS
- 1. Patent Infringement | Concept and Scope of Protection of Patent Rights
- - Legal Elements of Patent Infringement
- 2. Patent Infringement | Penalties
- 3. Patent Infringement | Major Cases of Corporate Patent Infringement
- - Production and Sale of Similar Products by Competitors
- - Unauthorized Use of Technology by Partner Companies
- - Cases of Breach of Technology Transfer Agreements
- - Startups Using Similar Technology by Former Officers and Employees
- - Patent Infringement by Distributors and Retailers
- 4. Patent Infringement | Corporate Patent Infringement Risks
- - Legal Response Measures
- - Checklist for the Prevention of Corporate Legal Risks
1. Patent Infringement | Concept and Scope of Protection of Patent Rights
Patent right infringement is a type of infringement that frequently occurs when developing technology jointly with other companies or carrying out collaborative projects.
To be protected from patent right infringement, each company needs to take an active stance by filing patents for its core technologies or working to defend the patent rights it already holds.
A patent right refers to the right to exclusively work an industrially applicable invention for a certain period.
The subjects protected under the Patent Act include products, methods, uses, substances, and structures, and a registered patent holder has the right to prohibit a third party from working the patented invention without authorization and to take legal measures against such conduct.
The scope of protection is limited to the matters described in the registered patent claims, and where another person works technology that falls within these claims, it is assessed as infringement.
Legal Elements of Patent Infringement
For patent right infringement to be established, first, there must be a validly subsisting patent right; second, the other party's product or method must fall within the claims of that patent; and third, it must have been worked without a legitimate license.
In particular, for a product invention, acts such as "producing, using, transferring, importing, and selling" constitute infringement, and for a process invention, acts such as "using the process and transferring, using, or importing a product produced by that process" constitute infringement.
2. Patent Infringement | Penalties
For patent right infringement to be established, the patent right concerned must remain valid and not extinguished, and the act of patent right infringement carried out by a third party must fall within the scope of protection of the patent right.
The third party must also lack a legitimate basis for exercising the patent right, and the actor must work the invention as part of economic activity.
If an act infringing a patent right or an exclusive license is found, the offender is subject to imprisonment for not more than 7 years or a fine of not more than 100 million won under the Patent Act.
If a corporation has committed patent right infringement, a fine of not more than 300 million won may be imposed on the corporation itself in addition to the actor.
3. Patent Infringement | Major Cases of Corporate Patent Infringement
Patent infringement does not arise from mere technical similarity alone, but occurs in various situations such as transactions between companies, personnel movement, and technology transfer.
The types of patent infringement that frequently occur in actual corporate activity can be specified as follows.
Production and Sale of Similar Products by Competitors
This is a case in which a competitor launches a product whose functions, shape, configuration, and the like are substantially identical to, or equivalent to, the patentee’s product.
In this case, if the elements and functions of the claims are effectively identical, it may be found to be patent infringement.
In particular, where the function is simple or the technical distinctiveness is not clear, whether infringement exists often becomes a matter of dispute.
Unauthorized Use of Technology by Partner Companies
This is the case where a prime contractor provides technical drawings or prototypes to a parts supplier or contract manufacturer, after which the partner company uses them without authorization in similar products or provides them to a third party.
In this case, it may be interpreted as unauthorized use beyond the scope of an ‘implied license to use,’ and infringement liability may arise.
Cases of Breach of Technology Transfer Agreements
This is a case where, after providing certain technology under a technology transfer agreement, the recipient uses the relevant patented technology beyond the scope of the agreement, re-transfers it to a third party, or develops and commercializes its own product.
An act that exceeds the working scope set in the agreement constitutes patent infringement and is a ground for a claim for damages and for invalidation or termination of the license.
Startups Using Similar Technology by Former Officers and Employees
This refers to cases in which core technical personnel in research and development, design, or similar functions leave a company and then effectively copy the existing company's patented technology, or develop similar products or processes based on it and start a new business.
In particular, there are many cases in which technical data, circuit diagrams, manufacturing process drawings, and the like are retained internally, taken out, and then used. This is a type of patent infringement that may also overlap with the leakage of industrial technology and the infringement of trade secrets.
Patent Infringement by Distributors and Retailers
Distributing products supplied by a manufacturer or selling them on an online marketplace may constitute patent right infringement.
In particular, where products are supplied through the OEM method, there are cases in which a supplier sells them without knowing that the supplier manufactured infringing products and then bears liability for damages.
The Supreme Court views an act of sale as also constituting infringement, so distributors should exercise caution as well.
4. Patent Infringement | Corporate Patent Infringement Risks
A company’s legal risks related to patent infringement are divided into cases of infringing and cases of being infringed, and in each respect the legal, financial, and business losses can be very large.
Examined in detail, they are as follows.
① Where the company becomes the infringer – where it has infringed another party’s patent
In this case, in addition to a claim for damages, the launch of the product may be delayed or entirely halted due to measures such as a provisional injunction prohibiting sales, suspension of import clearance, and compulsory recall.
In particular, where intent is proven, damages of up to three times may be awarded, and there is also a possibility that officers and employees may be subject to criminal punishment.
② Where the company becomes the victim – where its own patent has been infringed
In particular, if the patent infringement is not recognized in a timely manner, business losses may accumulate during the infringement period, and substantial actual harm may follow, such as the cutting off of customer inflow.
In this case, a passive response to a claim of no right by the patent holder may lead to a loss of rights, so a prompt response is important.
③ Expansion of risk in the global market
Even for the same technology, whether a patent has been filed, the scope of registration, and the term of the right differ by country, so there may be exposure to infringement claims abroad.
In particular, countries such as the United States, the EU, and China tend to impose very high damages and substantial measures blocking business in patent litigation, so international risk management is necessary.
④ Adverse effect on corporate image and investment attraction
In particular, for startups and small and medium-sized enterprises, patent litigation can become a matter directly affecting survival, and there are cases in which follow-up investment has been halted after a dispute.
Legal Response Measures
When patent right infringement occurs, a company may consider pursuing the following legal measures in parallel.
① Prohibition of the infringing act and preventive measures
② Sending a warning letter to the infringer
③ Filing an injunction and damages lawsuit for the infringement
④ Application for a provisional injunction (prohibition of sale, prohibition of import)
⑤ Filing a patent invalidation trial (against the other party's patent)
Checklist for the Prevention of Corporate Legal Risks
The following checklist can be used to review patent right infringement risks in advance.
| Check Item | Whether Checked |
|---|---|
| Conducting a search of others' patent rights related to major products and services | □ |
| Advance search and analysis of patent right infringement before launch | □ |
| Regular management of the company's own patent right portfolio | □ |
| Whether technology transfer and nondisclosure agreements have been concluded with partner companies | □ |
| Whether nondisclosure and noncompete agreements have been concluded with departing employees | □ |
| Securing legal advice and a response manual in the event of a patent dispute | □ |
| Whether the rights and obligations of technology license agreements are clarified | □ |
| Establishing a system to identify domestic and overseas distribution channels of patent-infringing products | □ |
| Whether evidence of willful infringement can be secured | □ |
| Establishing in advance a strategy to respond to a patent invalidation trial | □ |
Patent right infringement is a significant legal risk that goes beyond a mere legal dispute and is directly connected to a company's technological competitiveness, market share, and brand value.
Recent precedents and statutes have further strengthened the level of protection for rights holders, so a system for advance management and dispute preparedness should be put in place.
A company should prevent patent right infringement in advance and, when an act of patent right infringement occurs, protect its asset value through prompt and professional responses such as securing evidence of infringement, maximizing the amount of damages, and filing for a provisional injunction with the assistance of legal experts.
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