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Editorial

KFTC CONDUCTS EXTENSIVE INVESTIGATION ON ABUSE OF IT PATENTS

November 2010 - Finance. Legal Developments by Kim & Chang .

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On August 9, 2010, the Korean Fair Trade Commission (β€œKFTC”) launched an industry-wide investigation into possible abuses of patent rights in the IT industry. This is the first time that the KFTC has launched an extensive investigation into whether domestic or foreign/multinational corporations in the IT industry have abused their patent rights. According to the KFTC’s press release, 59 companies (40 domestic and 19 multinational corporations) that have direct or indirect relationships with the domestic IT industry are subject to the initial investigation.

The KFTC investigation targets companies that own crucial patents in the IT industry, covering products such as semiconductors, mobile telecommunications, computers and related hardware. In particular, the investigation will focus on companies that have been involved in patent disputes with small and medium-sized Korean enterprises ("SMEs"). The KFTC announced that "recently there has been a drastic increase in the number of patent disputes as well as cases in which large corporations have abused their patent rights against SMEs in order to monopolize the market" and that "in comparison to other industries, the IT industry has shown more concerns in relation to potential abuse of patent rights, which led to the launch of this extensive investigation."

According to the KFTC's press release, the types of practice subject to this investigation are those activities that may restrict competition in the market such as: (i) sales of tie-in products that are irrelevant to the patented technology; (ii) delaying entry of competitors into the market by filing groundless patent litigations; and (iii) setting royalties at an unreasonably high rate without justifiable reason or charging discriminatory royalties.

By Sung Eyup Park and Kee Hong Chun of Kim & Chang

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