Korean Prime Minister Chung Hung-won’ s statement echoes the increasing recognition by corporate and government leaders that IP monetisation and management is a core influencer of business and economic performance as well as national security. This was the umbrella theme which was embraced at the 2nd Annual Korea IP Conference, which brought together 100 of Korea’s topnotch IP experts under the support of Yulchon LLC, the Licensing Executives Society Korea, the Internet address Dispute Resolution Committee and the Korea In-House Counsel Association.

IP-related regulatory updates and government initiatives

The conference opened with Seo Eulsoo of the Korea IP Office (KIPO) introducing the government’s three pillars in its five-year plan to achieve an IP-based economy. Firstly, in the field of customised examination services, KIPO has managed to make impressive reductions in the duration of the examination, patent trial and appeal pendency. By 2017, KIPO aims to make further improvements to its capabilities and processes, shifting from a supplier- to a user-centric IP examination. Secondly, KIPO has undertaken strengthened enforcement and anti-counterfeiting initiatives including the setting up of an online monitoring and forensic system, the conduct of nationwide campaigns in partnership with consumer organisations, aggressive social and traditional media campaigns, as well as the establishment of a national enforcement network. Thirdly, Seo spoke about the upcoming changes to the Patent Law, which would enable the simplification and facilitation of the patent licensing process. Importantly, the new law permits foreign language applications and enhances patent protection via the increase of damage compensation and the reinforcement of obligatory material submissions.

The government track continued with Kwun Kuiwou of the Presidential Council on IP giving an overview of the IP Framework Act and the five-year National IP Basic Plan. Kwun gave a comparative analysis of Korea’ policies and initiatives undertaken in major IP trading powerhouses including the U.S., Japan and China. Ten key strategic points have been determined with initiatives focusing on enhancing IP quality, litigation and financing. The government has taken active steps to encourage IP mortgaging and a shift from a government-backed to a private market-based IP technology valuation system. In addition, there are policies in place to extend copyright protection to not only distributors, but also to content creators. For the purpose of implementing this ambitious plan, a Patent Hub Committee has been set up, bringing together public and private sector experts. Coordination activities are conducted at the provincial level as well as internationally, including the IP Attaché Program in the U.S. and the EU, the IP Desk and the Overseas Copyright Centre with offices in ASEAN and China.

The Korean-specific updates were complemented by a regional overview by Kwang Jun Kim, chief IP officer at Samsung Display, and the newly appointed president of the Licensing Executives Society Korea: Today’s IP world is being driven by multibillion dollar transactions and the emergence of global transaction-driven companies such as Intellectual Ventures or RPX Corp, mainly based out of North-America. Kim called for a stronger leadership role by the APAC region, an aspiration long projected by Singapore and Hong Kong for the establishment of an IP hub not only for the region, but on a global scale, leveraging on homegrown resources and networks. He explained that 60 percent of U.S. patents come from Asia, with Samsung having overtaken Siemens as the number one patent applicant in Europe; figures which reinforced Kim’s vision. To achieve this vision, he suggested that an objective cross-border IP system leveraging the fundamental strengths of each country in the region be created.

IP versus competition law compliance

In his speech, Sang-Seop Noh, former head of the Anti-Monopoly Division of the Korea Fair Trade Commission (KFTC), addressed the intricate relationship between IP and competition law. KFTC takes a stringent approach in fighting anti-competitive patent holdups and the abuse of Standard Essential Patents, such as the cases of Samsung versus Apple as well as the KFTC’s enforcement action against chipmaker Qualcomm shows. Noh also reported on KFTC’s efforts to prepare guidelines on the management of non-practicing entities (NPEs) – scheduled to be completed by the end of 2014 - to fill the void generated by the lack of international standards. In addition, KFTC has recognised the potential harm caused by technology appropriation in the form of intellectual leaks and has, therefore, engaged in multilateral efforts to revise regulations and guidelines to strengthen enforcement mechanisms. These initiatives allow KFTC to fulfil its mission of balancing innovation and competition law compliance, applying a multistakeholder approach involving all relevant government and private sector entities.

Calvin Park of Qualcomm offered an alternative perspective, posing the question whether the involvement of an antitrust agency is necessary in the management of IP, given the different sets of traditions surrounding the two legal regimes. Following a review of the Guidelines of the Unfair Exercise of IPR and cases involving Fair, Reasonable and Non-Discriminatory (FRAND) and injunction claims, Park concluded that while there was a strong need to address IP rights (IPR) issues in both antitrust and IP law regimes, it was necessary to not let one regime unnecessarily override the other.

Is the EPROMs analysis dead?

Samuel Lee of Yulchon introduced the unique, but highly relevant topic regarding the extent of the U.S. International Trade Commission’s (ITC) authority to stop the trade of products infringing on U.S. patents. Lee debated the viability of the nine-factor Erasable Programmable Read-Only Memories (EPROMs) analysis which is used by the ITC to determine whether a violation of a component patent would also entitle the ITC to exclude downstream products containing the infringing component. This has been questioned in the wake of the Kyocera case, whereby the Court of Appeals for the Federal Circuit restricted the authority of the ITC to issue limited exclusionary orders (LEOs) to named respondents, and did not allow application of the LEO to non-respondents of ITC investigations. In the Kyocera case, these would be Qualcomm’s customers who manufactured products which contained the infringing Qualcomm chip, but were not named in the complaint. Lee spoke about the inconsistent signals from the ITC in subsequent cases on whether the EPROMs analysis was viable, and advised companies to continue to apply the EPROMs analysis in future ITC investigations.

Cracking down on counterfeiting syndicates

Lunch was followed by a series of sessions concentrating on issues related to anti-counterfeiting, anti-piracy and brand protection. Sven-Erik Batenburg of the European Chamber of Commerce in Korea opened the brand protection panel with shocking statistics depicting the magnitude of counterfeiting in the EU, the U.S. and Korea, placing the North Asian IP hub among the top 10 countries in the world in terms of value from which the goods seized in the U.S. and the EU originate. The effect of widespread counterfeiting goes beyond the general perception, posing serious economic and national security risks. Victims are not only the major brands, but include general consumers, local entrepreneurs and governments. Counterfeit goods are also increasingly used by criminal syndicates and terrorist organisations, taking advantage of the fact that the counterfeiters are not high on the priority list of government enforcement. Amid these disheartening statistics, Korea has stepped up its public-private preventive and enforcement initiatives, such as the Seoul Low Visibility Project. Yusun Woo of Louis Vuitton gave a comprehensive overview of the initiative entailing a staggered process of notice, verbal warning, police reporting and ultimately, judicial action including raids and seizures from 2013 through 2014. Prior to take-off, more than half of the stalls at the Itaewon, Myeongdong, Namdaemun and Dongdaemun markets sold counterfeit products, but the project managed to reduce counterfeit visibility by 80 to 100 percent, showing the tangible advantages of collaboration between enforcement agencies and brands.

Ryu Seong-hyeon of the Korea Customs Service/World Customs Organisation gave further examples on the increasing crackdown on counterfeit goods by enforcement agencies, reporting a record number of seizures, especially among goods harmful to health. The Customs Office set up a dedicated information analysis team targeting fake cargo smuggling and stepped up its efforts against identity theft and the misuse of duty-free allowance in express cargo management. A user-driven Cyber Watchdog has been established to strengthen online purchase monitoring and crackdowns, with incentives for detection and reporting. The Customs Office has also been organising biennial Counterfeit Comparison Exhibitions to raise awareness on the adverse effects of counterfeiting, and signed multiple Memoranda of Understanding (MoU) with right holders, Internet Service Providers and third- party stakeholders to improve enforcement through collaboration and information sharing.

Combating online piracy: Website blocking and the graduated response

Kwee Tiang Ang of IFPI Asia opened the online anti-piracy panel with figures which underlined the decline in the music industry’s revenues caused largely by online piracy. Ang advocated the active involvement of Internet Service Providers (ISPs) in the fight against piracy, leveraging their technical expertise and their inherent social responsibility to stop traffic to unlicensed services. Website blocking is an increasingly popular and effective measure to do so, with Singapore enacting a related legislation in July 2014, Australia undergoing consultation to introduce a similar law, and some 17 other countries blocking user access to infringing websites through administrative or judicial measures. As a result of these policies, Ang reported that there has been a 68 percent drop in the use of well-known illegal downloading website Pirate Bay and similar figures applied to the traffic on Grooveshark as well. Alternative, but equally important, measures included the prevention of advertisements on infringing sites, which is a major source of revenue funding illegal sites, as well as litigation which led to the suspension of important sites such as isoHunt, Megaupload, Rapidshare or Hotfile.

In Korea’s case, Ang highlighted that the combination of website blocking with the so-called 3-strikes graduated response system, similar to France’s Hadopi law, which sends out notifications to users encouraging them to stop infringing activities and warning them of the consequences of non-compliance, such as account suspension. Statistics show that during 2013-2014, Hadopi resulted in a 50 percent decrease in P2P, a 16 percent decrease in Torrent services, and an increased awareness in users to move to legal platforms. Tae-Yeon Cho of Cho & Partners gave a practical illustration of Ang’s recommendations in Korea, saying that the Korea Communications Standard Commission is authorised to block websites. He also mentioned that reaching court decisions in a piracy case is often time-consuming and costly, while administrative measures require the consent of ISPs and the advertisers. Despite such challenges, enforcement action continues: Ho-Hyun Nahm of the Internet address Dispute Resolution Committee delivered a presentation on Korean court cases where criminal liability had been imposed on ISPs and even users with regard to illegal downloading, although there is no specific law in place on anti-piracy like in Japan. The Digital Copyright Exchange was recently introduced by the Korea Copyright Commission providing licensing agreement services for news, music and literary works, attracting 357 million applications since its inauguration in 2010.

Domain name dispute resolution mechanisms

Nahm then proceeded to give a detailed presentation on trademark and online brand protection as well as the fight against cyber-squatting, with a focus on domain name dispute resolution. Nahm suggested that domain name dispute resolution mechanisms, such as UDRP, be used provided the following three conditions applied: a domain name identical or confusingly similar to the trademark, lack of legitimate interests and bad faith. He also spoke about the implicit consensus that well-known personal names are de facto protected, such as the case of “chungmongku.com” versus “chungmongku.net” shows. As the UDRP does not apply to country code top-level domains (ccTLD), Korea set up a “.kr” Domain Name Dispute Resolution Policy (KDRP). “.kr” domain name registrations are managed by the Korea Internet Security Agency (KISA), while the Act on Internet Address Resources (AIAR) designates the Internet address Dispute Resolution Committee (IDRC) as the sole Alternative Dispute Resolution (ADR) provider. Nahm then gave a rundown on the ADR process including filing, duration and remedies available as well as examples of ADR cases conducted by the IDRC (eg. “alibaba.kr”, “cnnews.co.kr”, “marriott.co.kr” versus “mariott.kr”, “goople.co.kr” etc). The UDRP requires the establishment of the conjunctive existence of bad faith registration and bad faith use, while in the case of the KDRP, the existence of either bad faith registration or bad faith use suffices to launch an ADR process. Concluding the session, Nahm recommended the adoption of a multi-stakeholder approach, similar to physical anti-counterfeiting, to ensure effective online brand protection. 

IP-related ADR and the fight against patent trolls

Catherine Lee, Neutral at the World IP Organisation (WIPO), offered further insight into ADR mechanisms available in the broader spectrum of IP management. Lee argued that while IP ADR was an optimal choice for a collaborative, confidential and flexible dispute resolution process, the mechanism was difficult to apply in cases involving bad faith, such as counterfeiting. In-house figures with regards to WIPO-administered cases show that mediation has a higher chance (69 percent) of achieving settlement, while 40 percent of arbitral cases lead to arbitral awards in comparison to 60 percent that result in settlement. Technology disputes tend to be easier to resolve via ADR instead of litigation, as shown by the WIPO 2013 International Survey on Dispute Resolution in Technology Transactions or by the case of the U.S. Fair Trade Commission versus Motorola, where the Arbitration and Mediation Centre acted as an officially qualified arbitrator.

The subsequent presentations of the conference continued on the dispute resolution track with Anders Eriksson of Ericsson describing the increasing monetary and operational risks posed by Non-Practicing Entities (NPEs). NPEs enjoy a great power imbalance vis-à-vis regular right holders since they are hardly subjected to FRAND obligations, nor do they have the need to secure a licence for their business. NPEs typically adopt a “divide and conquer” strategy, attacking both the parent company and its customers, clients or even competitors, which is why a transparent, multi-stakeholder approach is necessary, including joint case management with co-defendants, who may potentially be industry competitors. As an “IP powerhouse,” Ericsson therefore, typically formalises close collaboration across different functions, jurisdictions (headquarters and local offices), and between in-house and external lawyers to ensure the effective management of disputes involving NPEs. David Kwon of Ericsson-LG gave an illustration of such a successful collaboration through a case involving the company: Best practices from this case included the engagement of Defence Patent Aggregation (DPA) service providers, simultaneous juggling of litigation procedures, and behind-the-scene settlement discussions as well as the selection of a favourable jurisdiction. Echoing Sang-Seop Noh’s presentation, Kwon also anticipated the introduction of KFTC guidelines regulating NPEs in South Korea, especially their illicit activities including licensing without legitimate reason, the abuse of patent litigation, and patent privateering.

Challenges faced by in-house counsel in managing IP

The concluding in-house panel addressed the various challenges faced by generalist in-house counsel in balancing IP-specific matters with their day-to-day transactional responsibilities. According to Anders Eriksson of Ericsson, there is an increasing requirement to be familiar with IP matters, but also “know what you don’t know,” namely instances when external expertise should be sought.

John Kwak of Hyundai Heavy Industries mentioned that external counsel assistance can also help bolster an in-house initiative, especially when the “prophet is not honoured in his own house,” either due to interdepartmental politics or dynamics.

IP education was considered a key task by all panelists, with David Kwon of Ericsson-LG calling for widespread training across all staff levels. Kwak described an in-house case, wherein infringement had clearly occurred, but a lack of protection in jurisdictions where the infringers operated did not allow for necessary legal action. The legal team has therefore used a flowchart exercise to educate employees on the importance of cross-jurisdictional IP registration and protection. This case shows how legal and IP counsel often act as a bridge between sales and technical staff, understanding and teaching how IP, trade secrets and proprietary know-how are best utilised.

IP is increasingly becoming a core asset of companies. For Jay Im of CJ E&M who is from a content business, this is self-explanatory as the company’s main assets are its copyrights, making IP and business expertise an indispensable knowledge for in-house lawyers. A company like CJ E&M thus places extra emphasis on having lawyers train the business people on IP rights and the role they play in the business of producing, selling and buying. But such a paradigm shift has also manifested in other industries, for instance, at Ericsson, where structural changes allowed for the setting up of a separate business line for IP-encompassing development, commercialisation, assertion and defence, thereby linking IP directly to Ericsson’s core business. In addition, the separation of the IPR/patent business and the legal function at Ericsson actually contributed to improving collaboration between various departments. This helped resolve the recurring conflict between the legal and patent teams due to misalignment of interests, as pointed out by Professor Youngtack Shim of the Seoul National University.

The panel reached a unanimous agreement that in-house and IP counsel must take proactive steps to stay on top of the company’s business objectives, moving from a “back-office function” to an integrated, strategic role, acting as a “translator” of IP matters as well as a protector of these assets. This is the case at places like Ericsson and CJ E&M, where the head of IPR and licensing or the head of legal report directly to the CEO as part of the Group Executive Management Team; a vote of confidence much hoped for by the rest of the panel members.