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March 2019
March 2019Korea Supreme Court overrules an existing line of case laws and finds that ”a licensee may request a patent invalidation trial.” (Case No. 2017 Hu 2819, Korea Supreme Court, en banc, decided on February 21, 2019)
1. Summary of the Decision
(1) Korean Patent Act defines that “a party in interest or an examiner may request an invalidation trial.” Here, a party in interest is someone who has direct and practical interest in extinction of a patent right for fear of being legally disadvantaged in any way due to the continuation of the patent right to an invention and includes a person who has engaged in or is planning to engage in manufacture and sales of goods of the same kind as the patented invention in question. By this reasoning, unless there is a particular reason, an interest in requesting a patent invalidation trial may not be deemed extinguished just for the reason that a licensee to a patent right has not been challenged or is without fear of being challenged by a patent right holder.
(2) Generally, various restrictions are imposed on licensees, such as payment of royalties for license or restriction on the scope of license, etc., and a licensee may escape these restrictions by obtaining a decision to invalidate a patent through a patent invalidation trial. Even if a cause for invalidation of a patent exists, until the decision to invalidate the patent is confirmed, the patent continues to be effective and its existence cannot be arbitrarily denied, and, even if a patent invalidation trial is requested, considerable time and expenses are required until the confirmation of the decision to invalidate the patent. For these reasons, a person may defer the dispute as to the validity of a patent to a later date and practice the patented invention by obtaining a license from the patentee first even if the person would like to practice the invention without obtaining a license to the patent, so the mere fact that a person obtained a license cannot be deemed conclusive as an expression of intent not to dispute the validity of the patent.
(3) Therefore, all previous decisions, including Korea Supreme Court Case 76 Hu 7, decided on March 22, 1977, and Korea Supreme court Case 82 Hu 58, decided on December 27, 1983, which found that a person is not a party in interest just for the reason that the person is a licensee, to the extent those decisions are contrary to the present decision’s findings, are hereby overruled.
2. Background of the Case and the Patent in Question
(1) The plaintiff (IBEX PT Holdings, Co. Ltd.) is a patentee for the patent in this case, titled “A Method of Encoding Video in AMVP Mode,” and is registered as a licensor with the patent in this case recorded in “HEVC Patent Portfolio License Program” (hereinafter “HEVC License Program”) of MPEG LA(www.mpegla.com) which is a standard essential patent pool relating to video images.
(2) The defendant (Samsung Electronics, Co. Ltd.) is a registered licensor with its own patents recorded in the HEVC License Program while being a registered licensee having a license to practice the patented inventions on a list of patents in the patent pool above and is a manufacturer and seller of goods involving video images using the same kind of video compression technology as the patented invention in this case.
(3) In case a decision to invalidate the patent in this case is confirmed, by operation of Article 6.1 of the HEVC License Agreement, the agreement between the plaintiff and MPEG LA will become ineffective and the patented invention in this case will be excluded from HEVC License Program, so the defendant would be able to practice the patented invention in this case freely without any restriction.
(4) This is a case where the defendant requested a patent invalidation trial upon discovering the existence of an obvious reason for invalidation (violation of the expanded first-to-file rule) of the patented invention in question.
3. Our Recommendations
(1) We expect there will be an increase in the number of cases requesting a patent invalidation trial by a licensee paying royalties for standard patents following this decision.
(2) For patent right holders, it is strongly recommended that a patent right holder insert a “no challenge clause” in a license agreement, e.g. “a licensee acknowledges the validity of the patent and will not contest the validity of the patent,” in order to prevent patent invalidation disputes with licensees. While there is a debate as to the effectiveness of such a clause, it appears to be the most effective solution in practicality at present.
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