On February 21, 2019, the Supreme Court of Korea issued an en banc decision overruling

its prior precedents on the issue of whether a licensee who is continuing to make royalty

payments under an existing license agreement nevertheless has standing to challenge the

validity of the licensed patent. In short, the Korean Supreme Court held that absent

special circumstance, a patent licensee is an “interested party” eligible for challenging the

validity of a licensed patent, despite the lack of any threat or potential threat posed by

the patent holder against the licensee’s right to use the patented invention. (Supreme

Court En Banc Decision No. 2017Hu2819).

Mixed views on the issue

Under the Korean Patent Act, only an interested party may satisfy the standing

requirement to initiate a patent invalidation trial. Regarding the interpretation of

“interested party,” however, the Supreme Court’s long-held mixed views were that (i) the

mere grant of a license does not automatically disqualify the licensee from being an

interested party (See e.g., Supreme Court Decision No. 82Hu30 dated May 29, 2018); or

that (ii) since a licensee enjoys the right to use the licensed patent during the licensing

term, there is no actual or potential economic harm threatened against the licensee and

therefore the licensee is not an interested party (See e.g., Supreme Court Decision No.

82Hu58 dated December 27, 1983).

To address this unsettled issue, the Supreme Court used this case as the vehicle to clarify

the meaning of interested party by holding that any person who has a direct and actual

interest in invalidating a patent (due to the risk of loss or damage that may be caused by

the rights vested in the patented invention) is an interested party and this includes any

person who manufactures or sells or will manufacture or sell using the licensed patent.

The Supreme Court further held that pursuant to this legal principle, any person who uses

a patent under a grant of license should be considered an interested party, despite the

fact that there is no actual or potential threat posed by the patent holder regarding the

licensee’s use of the licensed patent.

Supreme Court’s reasoning

The Supreme Court’s decision was based on the fact that, (i) since patent licensees are

generally subject to various restrictions under a license agreement (e.g., royalty payments

and scope of license), they should be permitted a legal recourse for alleviating those

burdens by being able to challenge the licensed patent; and that (ii) since challenging and

invalidating a patent requires a significant amount of time and resources (even if the

patent has a valid cause for invalidation), a person who wishes to use a patent without

obtaining a license may postpone challenging the patent and choose to use the patent by

obtaining a license first. The choice to obtain a license should not be a bar to challenging

the patent later. In other words, obtaining a license does not constitute a waiver of right

to challenge the licensed patent.

Significance of this case

With this en banc decision confirming the Supreme Court’s stance on licensee’s standing

to challenge patent invalidity, royalty paying licensees are expected to revisit reviewing

the possibility of invalidating licensed patents in an effort to avoid unfavorable royalty

payment arrangements and remove unnecessary limitations on their use of the patented

invention (considering various factors such as restrictive licensee-licensor relationship,

rapid development of the relevant technology, or strong business prospects). For

licensees, this means that the need for proper evaluation of the validity of a patent is

more crucial than ever.

The Lee & Ko IP Practice Group is one of the largest and most prominent IP practices in

Korea and is recognized by clients and adversaries alike as one of the strongest practices

of its kind. From representing clients in Korea’s largest patent infringement cases and

invalidity trials to helping clients evaluate patent invalidity, the Lee & Ko IP Practice Group

has deep experience in a wide range of industries and remains the top choice in Korea

and around the world.

If you have any questions regarding this article, please contact below:

Un Ho KIM ([email protected])

Tae H. KIM ([email protected])

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