Recent Developments in IP Law - Korea

1. Recent Developments in IP Law - Korea Association of Patent Law Firms September 21, 2006 Sunhee Lee (Sughrue Mion)

2. Patent Act Amendment 2006 • Backgrounds • KIPO’s new policy to shorten the period to issue first office action: • Patent application 10 months, • Trademark, design 6 months, • trial 6 months (patent/utility model 9 months) • Harmonization with international treaties Sughrue Mion

3. Patent Act Amendment 2006 • Abolition of Opposition • Expansion of prior art to include an invention publicly known outside Korea • Extension of time limit for entering national phase of PCT application • Abolishment of requirement to submit Korean translation of priority documents Sughrue Mion

4. Patent Act Amendment 2006 (Con’t) • Expansion of subject of 6-month grace period to cover sales and marketing • Expansion of patentable plants • Third party observation Sughrue Mion

5. 1. Abolition of Opposition • Background • Opposition and invalidation are duplicative • Opposition procedure takes more than 1 year to conclude • No appeal -> opposer, when looses an opposition, initiate an invalidation Sughrue Mion

6. Abolition of Opposition (Con’t) • Applies to patent registered after July 1, 2007 • Current – within 3 months from the publication date, anyone file an opposition • Under new law: anyone may request an invalidation trial within 3 months from publication date, and, after 3-month period, only interested person may request an invalidation trial Sughrue Mion

7. Abolition of Opposition (Con’t) Sughrue Mion

8. 2. Expansion of prior art • Art. 29, sec. 1(1) • Effective date: Oct. 1, 2006 • Current: publicly known or worked in Korea, prior to the effective filing date • New law: publicly known or worked in a foreign country may be prior art Sughrue Mion

9. 3. National entry of PCT application • Art. 201, sec. 1 • March 3, 2006 • 31 months from earliest priority date Sughrue Mion

10. 4. Korean translation of priority documents • Effective Jan. 1, 2006 • Submission upon request by an examiner or a trial examiner Sughrue Mion

11. 5. Subject of 6-Month grace period • Art. 30, sec. 1 • Effective March 3, 2006 • Expand to cover all types of activities disclosing inventor’s own invention, such as sales and marketing • Old law: publication; certain conferences and exhibitions; involuntary disclosure Sughrue Mion

12. 6. Expansion of patentable plants • Abolish Art. 31 • Art. 31: only those plants that are asexually reproducible can be patented • Effective Oct. 1, 2006 Sughrue Mion

13. 7. Third party observation • New Art. 63 bis, effective Oct. 1, 2006 • Anybody may submit prior art references prior to publication of an application • Expected shorten time period to issue first OA (10 months), which is earlier than first publication of an application Sughrue Mion

14. 7. Compulsory Licensing • Amendments to compulsory licensing provisions to implement DOHA declaration to facilitate an easy supply of essential drugs to certain countries Sughrue Mion

15. Utility Model Act • Current UM (a kind of petit patent) registration without examination will be changed to post-examination grant system • Same procedure to patent examination process • Effective Oct. 1, 2006 • backgrounds Sughrue Mion

16. Utility Model Act (Con’t) • Abolish dual application and adopt conversion between utility model and patent applications Sughrue Mion

17. Case Law Sughrue Mion

18. Compensation for Employee Invention • Patent Act, Art. 40, sec 1: an employee has right to appropriate compensation for his (her) employment invention when the application or patent is assigned or exclusively licensed to employer via a contact or employment agreement Sughrue Mion

19. Compensation for Employee Invention(2003 Na 52410) • Background of the case • Employer (Dong-A Pharmaceutical Co.) • oral formulation of antifungal agent (itraconazole) • failed to develop such formulation • Employee • proposed a new manufacturing method • under this method, a commercially viable formulation was obtained and later approved by KFDA Sughrue Mion

20. Compensation for Employee Invention • Total 6 inventions relating to oral formulation • Employee: a named inventor in 3 inventions • Internal regulation • disposal compensation: when an employee invention is licensed to another company, the employee who made the licensed invention is entitled to 5-10% of the royalty income • No disposal compensation was paid Sughrue Mion

21. Compensation for Employee Invention • License agreement between Dong-A and Janssen Korea • Dong-A’s abandonment of itraconazole market • Transfer of know-how and exclusive license of 6 inventions • Payment • initial commitment fee: US$ 4M • initial licensing fee: US$ 2M • running royalty: 3-5% (in case of three or more competing products in the market, 1%) Sughrue Mion

22. Compensation for Employee Invention (Seoul District Ct.) employer’s profit due to employee invention (initial commitment fee + initial licensing fee + running royalties) share of profit attributable to entire inventors involved (5% in view of internal regulation) degree of contribution made by the employee at issue (30%) x x Sughrue Mion

23. Compensation for Employee Invention (Issues on Appeal) • Whether the Court can interfere with private contract between employer and employee (i.e., internal regulation) • Whether the profit gained by Dong-A include initial payments in view of its abandonment of business and know-how transfer • Whether Dong-A’s R&D costs can be deducted from its profit Sughrue Mion

24. Compensation for Employee Invention (Seoul High Ct.) • Employee’s statutory right to a reasonable compensation trumps over private contract in relation to employee invention (i.e., mandatory provision) • Approve three-factor formula of lower court • Non-compensatory profit (50%) derived from sacrifice of business opportunity and transfer of know-how • Compensatory profit (50%) subject to employee compensation Sughrue Mion

25. Compensation for Employee Invention (Seoul High Ct.) • Apportionment of compensatory profit (10%) • employer’s substantial investments (R&D) • internal regulation (5-10%) • employer’s aggressive license negotiation • Contribution made by employee at issue (30%) • employee’s critical role in successful development of itraconazole product Sughrue Mion

26. Abuse of patent right as defense (1) Enforcement of a patent which is invalid for lack of novelty (2) Enforcement of a patent which has an inherent defect (3) Enforcement of a patent with the full knowledge of non-infringement Sughrue Mion

27. Source of Accused Party’s Frustration (1) No patent invalidity defense available in an infringement action (2) Separate proceeding required to invalidate the patent (3) Statutory presumption of patent validity until final and conclusive court decision Sughrue Mion

28. Unenforceability of a Patent Lacking Novelty Supreme Court 81 Hu 56 (July 26, 1983) “The scope of a patent claim cannot be allowed to encompass what was already in the public domain as of the filing date of the patent involved. Accordingly, such patent claim cannot be enforced even if no final decision to invalidate the patent has been rendered.” Sughrue Mion

29. Supreme Court Case No. 99 Hu 2853 (April 12, 2002) “If an IP right is substantially identical to the prior art available before the filing date thereof, such right may not be enforced regardless of the finality of the invalidation decision and without having to compare it with the accused party’s technology.” Sughrue Mion

30. Supreme Court Case No. 2000 Da 69194 (October 28, 2004) The court hearing a patent infringement action may examine whether or not the patent in suit is valid, regardless of the status of the patent nullification trial. If the patent is shown to have a prima facie invalidating deficiency, enforcement of such patent may result in an abuse of patent right and wrongfully injure the accused party. Sughrue Mion

31. Admissibility of Prior ArtPatent Court Case No. 2003 Heo 4948 • Invention at issue • a medicinal composition for the treatment of neurodegenerative diseases (e.g., Alzheimer’s disease, Parkinson’s disease) comprising a known compound (i.e., estrogen, a female sex hormone) Sughrue Mion

32. Admissibility of prior art 2003 Heo 4948 Argument 1 • The pharmacological mechanism disclosed in the prior art reference (promotion of growth of nerve cells) and that employed in the patent application (protection of nerve cells) are different • Inasmuch as the pharmacological mechanism is not one of the elements recited in the claims, such difference is irrelevant Sughrue Mion

33. Admissibility of prior art 2003 Heo 4948 Argument 2 • Prior art reference discloses two examples • Ex 1: administering a composition comprising fluoxymesterone to a 60-year old male patient having Alzheimer’s disease and Parkinson’s disease • Ex 2: employing a composition comprising 1.25mg of estrogen and 10mg of methyltestosterone for a 78-year old female patient suffering from Alzheimer’s disease • efficacy data disclosed in the reference lack the statistical reliability Sughrue Mion

34. Admissibility of Prior Art2003 Heo 4948 Argument 2 • the efficacy data disclosed in the reference might not be sufficient enough to make the invention patentable • if one skilled in the art can rely on the data disclosed in the reference to ascertain the medicinal efficacy of the invention for the treatment of neurodegenerative diseases, that reference can be used as prior art Sughrue Mion

35. Admissibility of Prior Art2003 Heo 4948 Argument 3 • The reference lacks credibility because the patients tested in the working examples were diagnosed to have acquired Alzheimer’s disease by using an unreliable method • The subject invention has nothing to do with the method of diagnosing the Alzheimer disease Sughrue Mion

36. Admissibility of Prior Art2003 Heo 4948 Argument 4 • Since the treatment effects of the two patients as described in the working examples were too dramatic and unusual to actually happen to Alzheimer patients, the reference lacks credibility • Although the reference focuses or exaggerates on certain partial aspects of the treatment effects, such description cannot be said to lack credibility to a person skilled in the art Sughrue Mion

37. Admissibility of Prior Art2003 Heo 4948 Argument 5 • Reference lacks credibility because the composition used in Ex 1 does not contain any female sex hormone and the composition employed in Ex 2 contains estrogen in an amount of 1/8 of the male sex hormone used • It is true that the working examples contained in the reference do not directly support the medicinal efficacy of a female sex hormone. Nevertheless, one skilled in the art, in light of the knowledge available as of the filing date, can rely on the data disclosed in the reference to ascertain the utility of an estrogen composition for the treatment of neurodegenerative diseases Sughrue Mion

38. Admissibility of Prior Art Supreme Court Decision (2004 Hu 2307 dated March 24, 2006) • A prior art publication includes not only a document which clearly describes the overall constitution of a technology but also those documents which fail to provide a sufficient disclosure due to lack of data or contain deficiencies in certain parts thereof so long as an ordinary person skilled in the art, in light of common technical knowledge and experience, can readily ascertain the technical content thereof Sughrue Mion

39. Admissibility of Prior Art Supreme Court Decision • While it cannot be denied that the reference contains certain deficiencies, this Court rules that one skilled in the art can readily ascertain the utility of a sex hormone such as estrogen for the treatment of neurodegenerative diseases Sughrue Mion

40. Statistics in 2005 • Patent applications: 157,114 (about 75% by Korean) • Foreign: Japan (about 40%; USA about 30%; Germany (8%), Netherlands (6%) • Utility Model applications: 36,945 • Design applications: 44,957 • Trademark applications: 115,014 • 7th country in # of PCT filing • About 1100 examiners (June 2006) Sughrue Mion

41. THANK YOUSunhee Lee (sxlee@sughrue.com)Sughrue Mion (www.sughrue.com) Sughrue Mion