Intellectual Property Infringement | The Supreme Court's Judgment on the Calculation of Damages for Infringement of an Exclusive Non-Exclusive License

Intellectual property infringement This case raised the question of whether an exclusive non-exclusive license to a patent right also applies to utility model rights, design rights, trademark rights, and the like, in a damages action, as well as whether the amount claimed must be specified for each damages claim.

The plaintiff was granted by A the authority to use the technology related to the product at issue (A's patent rights, design rights, and the like) and to sublicense it to third parties.

The defendant entered into a contract under which, while manufacturing and selling products using the technology related to the product at issue, it would pay the plaintiff a royalty calculated by multiplying its net sales by the agreed royalty rate.

Although the plaintiff notified the defendant of termination of the contract on the ground of nonpayment of royalties, the defendant disregarded this and continued to manufacture and sell the products.

The plaintiff claimed against the defendant the royalties accruing during the contract period and, in the alternative, damages arising from infringement of the plaintiff's utility model right, infringement of trade secrets through sales after termination, infringement of the exclusive license to the patent right, infringement of the exclusive license to the design right, infringement of the exclusive right to use the trademark, and infringement of the exclusive non-exclusive license.

The Supreme Court held that the lower court should have properly exercised its power to clarify and ascertained the meaning of the exclusive non-exclusive license that the plaintiff claimed had been infringed.

A patentee may grant a non-exclusive license to its patent right to another person. Where, in doing so, the patentee bears an obligation to refrain from granting a non-exclusive license to any third party vis-à-vis the licensee, that licensee may be regarded as holding an exclusive non-exclusive license. (See Supreme Court, Decision of November 26, 2020, 2018 Da 221676, among others.)

The Supreme Court took the view that this legal principle applies equally to utility model rights, design rights, trademark rights, and the like, and held that the lower court should have examined whether the plaintiff had been granted the rights it asserted by A and determined whether the claim for damages was recognized.

The Supreme Court also recognized that the plaintiff's losses from the sale of the infringing products included losses arising from infringement of the exclusive license to the design right.

Because the plaintiff had claimed only a portion of the aggregate of the individual losses without specifying the amount claimed for each damages claim, the Supreme Court held that the amount claimed must be specified for each damages claim so that it could be determined whether each damages claim was recognized.

Taking the view that the amount of damages for each damages claim must be calculated and determined, the Supreme Court reversed and remanded the lower judgment.

Intellectual property In trademark-related damages, where it is difficult by the nature of the facts to establish the facts necessary to prove the amount of loss, the court may determine the amount of loss based on the entire purport of the pleadings and the results of the examination of evidence.

In determining the specific amount of loss, the court must seek out the indirect facts that form the basis for calculating the amount of loss and, by reasonably evaluating the indirect facts so identified, calculate an amount of loss that can be objectively accepted.

Even where a creditor holds several damages claims against the same debtor, because those damages claims may differ from one another in the starting date of the extinctive prescription period or in the defenses the debtor may raise, the creditor must specify the amount claimed for each damages claim.

In intellectual property infringement litigation, the calculation of damages is intricate and complex and requires specialized legal knowledge. A prompt legal response can also help minimize the harm from intellectual property infringement.

Daeryun Law Firm LLP 🔗Intellectual Property Group draws on its practical experience to provide legal solutions for unlawful acts relating to copyright, patent rights, trademark rights, design rights, unfair competition, and trade secrets.