The Korean Patent Act ("KPA"), effective July 9, 2019, allows for punitive damages up to three (3) times the actual amount of damages for willful patent infringement. Recently, the IP High Court applied the punitive damages provision in a finding of willful infringement and ruled that the infringer compensate the patentee double the profits gained from the infringing acts that occurred during the period after the implementation of the amended KPA (IP High Court Case No. 2023 Na 11276 rendered on October 31, 2024; final and conclusive).
▶ Case Background and Lower Court's Decision
The plaintiff held a patent for an invention directed to a cooking container lid ("the patented invention"). The defendant manufactured and sold over 411,000 vacuum pots ("the defendant's products") that utilized the patented invention between November 30, 2015 and October 31, 2022 ("the infringing acts"), in an amount of exceeding USD 38.6 million.
The Busan District Court found that the defendant had willfully infringed the plaintiff's patent and made the following determination:
- For the period prior to the implementation of the amended KPA (November 30, 2015 to July 8, 2019; "Period A"): the defendant was required to provide compensation equal to the profits gained from the infringing acts based on Article 128(4) of the KPA1 ; and
- For the period after the implementation of the amended KPA (July 9, 2019 to October 31, 2022; "Period B"), the defendant was ordered to provide compensation equal to the profits gained from the infringing acts and an additional 50% of such profits.
▶ IP High Court's Ruling
The IP High Court upheld the calculation formula for damages awarded for Period A based on the amount of profits gained by the defendant. As for Period B, however, the Court increased the additional damages under the punitive damages provision to 100% of the profits earned, effectively ordering the defendant to pay double the profits gained. The specific reasoning of the IP High Court is as follows:
Factors Probative of Willfulness of Infringement2
- The plaintiff, as a former subcontractor of the defendant, disclosed the patented invention during their business relationship, and thus the defendant was aware of the patent prior to commencing the infringing acts.
- During negotiations with the plaintiff regarding the use of the patented invention, the defendant began manufacturing and selling the infringing products without the plaintiff's consent and continued to sell the products even after the negotiations broke down.
- The defendant received several cease-and-desist notices from the plaintiff, but continued the infringing acts.
- The defendant continued the infringing acts even after the invalidation trial and the negative scope confirmation trial, which had been initiated by the defendant, were dismissed.
- In view of the above, the Court found that the defendant committed willful infringement with awareness of the patented invention and with the knowledge that the production and sale of the defendant's products constituted patent infringement.
Factors Determinative of Punitive Damages3
- The plaintiff, as a subcontractor/supplier of products to the defendant, was in an economically disadvantageous position compared to the defendant, who was significantly larger in terms of both workforce size and revenue.
- Based on the facts reviewed, the defendant was found to have willfully engaged in the infringing acts with clear intent to infringe the patent.
- After implementation of the punitive damages provision, the defendant continued selling approximately 75,000 units of its products over a period of 3 years and 3 months, representing a substantial volume of sales.
- While the parties made several attempts to negotiate for a license of the patented invention, no agreement was reached, and the plaintiff received no compensation. Although the defendant recalled some of its products following the dismissal of the invalidation trial and negative scope confirmation trial, the quantity recalled was negligible compared to the total volume sold. Considering these facts, the defendant’s efforts to remedy the infringement could not be deemed sufficient.
- Taking all these findings into account, the punitive damages under Article 128(8) were determined to be double the profits gained by the defendant during Period B.
▶ Implications of the Ruling
By awarding damages amounting to twice the profits earned, the IP Court decision serves as a strong deterrent against intentional violation of patent rights and highlights the Korean courts' commitment to strengthening patent protection by applying the punitive damages provision for willful patent infringement.
1. Article 128(4) of the KPA provides that damages may be calculated based on the amount of profits gained by the infringer by virtue of the infringement, which is presumed to be the patentee's lost profits. 2. Article 128(8) of the KPA (effective July 9, 2019) allows courts to impose punitive damages for willful infringement, up to three (3) times the actual amount of damages (e.g., the amount of the infringer's profits presumed to be the patentee's lost profits according to Article 128(4) of the KPA). Under the revised KPA (effective August 21, 2024), punitive damages for patent infringement may be assessed up to five (5) times the actual amount of damages. 3. Article 128(9) of the KPA specifies eight (8) factors to be considered when calculating punitive damages: (i) whether the infringer holds a dominant position; (ii) the infringer’s willfulness or awareness of the likelihood that harm would be caused; (iii) the extent of damages suffered by the patentee or exclusive licensee as a result of infringement; (iv) the infringer’s economic profits gained as a result of infringement; (v) the duration and frequency of infringing activities; (vi) the amount of fines imposed on the infringer due to infringement; (vii) the infringer’s financial status; and (viii) the extent of the infringer’s efforts to mitigate damages. |
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