Licensing in South Korea 2024

Licensing in South Korea 2024

Licensing in South Korea 2024

LICENSING 2024

SOUTH KOREA

Dong-Hwan Kim, Ji-Ae Lim

(Lee International IP & Law)

OVERVIEW

Restrictions

  1. Are there any restrictions on the establishment of a business entity by a foreign licensor or a joint venture involving a foreign licensor and are there any restrictions against a foreign licensor entering into a license agreement without establishing a subsidiary or branch office? Whether or not any such restrictions exist, is there any filing or regulatory review process required before a foreign licensor can establish a business entity or joint venture in your jurisdiction?

In general, there are no restrictions on the establishment of a business entity by a foreign licensor or a joint venture involving a foreign licensor. Also, there is no filing or regulatory review process required before a foreign licensor can establish a business entity or joint venture in Korea, except in certain industries (e.g, the defense industry) where participation of foreign entities is limited or prohibited.

Also, a foreign licensor is not required to establish a subsidiary or branch office in Korea to enter into a license agreement in Korea. Accordingly, a foreign licensor may enter into a license agreement without establishing a business entity or a joint venture in Korea.

KINDS OF LICENSES

Forms of license arrangement

  1. Identify the different forms of license arrangements that exist in your jurisdiction.

In general, a license may be classified as either exclusive or non-exclusive. An exclusive license grants the licensee the exclusive right to exploit the relevant IP, whereas a non-exclusive license may simultaneously be granted to multiple licensees. Registration requirements for exclusive or non-exclusive licenses under Korean law may vary depending on the type of IP being licensed. Particularly, exclusive licenses of patent, utility model, or design, unlike non-exclusive licenses thereof, are not effective unless registered. In contrast, both non-exclusive and exclusive licenses of a trademark are effective even without registration; however, they must be registered in order for the licensee to be able to claim its license rights against third parties.

A license may also be classified as contractual license, statutory license, or compulsory license, depending on how the license occurs. Contractual license occurs by an agreement between the parties; statutory license occurs when certain requirements prescribed by relevant law are satisfied; compulsory license occurs by the adjudication of the Korean Intellectual Property Office.

Set out below are some examples of statutory or compulsory licenses of IP rights that are recognized under Korean law.

Under the Patent Act and the Utility Model Act, a statutory non-exclusive license of patent right and utility model right occurs if any of the following requirements are satisfied:

  • where a person makes an invention independently prior to the filing of an application for a patent for the same invention (or acquires details of the invention from such a person) and has been engaged in commercial or industrial activities or preparation thereof involving such invention in Korea;
  • where a lawful rightsholder files a patent transfer claim against another person who had no right to file the patent application or who is one of the joint applicants of the patented invention; and
  • where an original patent holder of a patent that will be invalidated on the grounds of an existing (often, unregistered) invention, which is identical to the registered patent, has deployed the invention or was prepared to do so without knowing that his or her patent would be subject to invalidation.

Under the Patent Act, a compulsory non-exclusive license of patent right occurs when the following requirements are met: if a patented invention falls under any of the following, and a person who intends to practice the patented invention fails, or is unable, to reach agreement on the grant of a non-exclusive license under reasonable terms and conditions, the person may file a petition for adjudication on the grant of the non-exclusive license (i.e, compulsory license) with the Commissioner of the Korean Intellectual Property Office (KIPO):

  • if the patented invention has not been practiced in Korea for at least three consecutive years, except in the cases of a natural disaster, force majeure event, or due to other just grounds prescribed by the law;
  • if the patented invention has not been practiced for business purposes in Korea on a substantial scale for at least three consecutive years without any just grounds, or fails to meet the demand in Korea to an appropriate extent under reasonable terms and conditions;
  • if it is particularly necessary to practice the patented invention for the public interest;
  • if it is necessary to practice the patented invention to rectify unfair trade practices found through judicial and administrative proceedings; or
  • if it is necessary to practice the patented invention to export medicines to a country that intends to import such medicines to treat diseases that threaten the health of the majority of its citizens.

Under the Trademark Act, a statutory non-exclusive license of trademark right occurs if all of the following requirements are satisfied:

  • where a person has been using a trademark identical or similar to the registered trademark of another person on goods identical or similar to the designated goods:
  • the person has continuously used such trademark in Korea before another person files an application for trademark registration without intending to engage in unfair competition; and
  • as a result of continuous use of the trademark, the trademark is recognized among consumers in Korea as a trademark of the goods of a specific person at the time another person files an application for trademark registration for the mark.

LAW AFFECTING INTERNATIONAL LICENSING

Creation of international licensing relationship

  1. Does legislation directly govern the creation, or otherwise regulate the terms, of an international licensing relationship? Describe any such requirements.

The compulsory patent license applies to a foreign holder of a patent right. Accordingly, if a person who wishes to obtain a license for a patented invention in Korea has negotiated with a foreign patent holder regarding a non-exclusive license and failed to reach an agreement and, if such person satisfies certain requirements as noted above, a non-exclusive license may be recognized.

Also, the Korean Monopoly Regulation and Fair Trade Act and the Review Guidelines for Unfair Exercise of Intellectual Property Rights (IPR Guidelines) regulate undue anti-competitive effects that may arise in the licensing of intellectual property rights. Especially, according to the IPR Guidelines, if a licensor abuses its status and sets the terms of a license agreement one-sided, such acts may be considered as unfair trade practices and the relevant contract clauses may be declared invalid. The licensor may also be subject to a fine.

Pre-contractual disclosure

  1. What pre-contractual disclosure must a licensor make to prospective licensees?

There is no law that requires a licensor to disclose certain terms or register a grant of licensing rights before the licensor enters into a license agreement. That being said, if a licensor enters into a license agreement where the licensor knew that the relevant patent rights are invalid as there are clear grounds for patent invalidation, the license agreement may be held invalid pursuant to the Civil Act as such acts would be considered to constitute a fraud against the licensee.

Registration

  1. Are there any requirements to register a grant of international licensing rights with authorities in your jurisdiction?

There is no requirement to register with authorities international licensing rights.

INTELLECTUAL PROPERTY ISSUES

Paris Convention

  1. Is your jurisdiction party to the Paris Convention for the Protection of Industrial Property? The Patent Cooperation Treaty (PCT)? The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?

Korea became a party to the Paris Convention in 1980. Korea joined the Patent Cooperation Treaty in 1984 and was designated as an International Searching Authority and International Preliminary Examining Authority in 1997. In 2007, the Korean language was selected as one of the languages that can be used in the publication of the international application. Also, Korea is a party to the Agreement on Trade-Related Aspects of Intellectual Property Rights.

Contesting validity

  1. Can the licensee be contractually prohibited from contesting the validity of a foreign licensor’s intellectual property rights or registrations in your jurisdiction?

Review Guidelines on Unfair Exercise of Intellectual Property Rights provides that a licensor shall not unfairly prohibit a licensee from contesting the validity of a patent to preserve the existence of the patent that is invalid. Accordingly, if a patent holder grants a license of patent rights to a licensee when it is clear that the patent is invalid, and then contractually prohibits the licensee from filing a patent invalidation action, the agreement may be invalidated.

Invalidity or expiry

  1. What is the effect of the invalidity or expiry of registration of an intellectual property right on a related license agreement in your jurisdiction? If the license remains in effect, can royalties continue to be levied? If the license does not remain in effect, can the licensee freely compete?

Under Korean law, once the registration of an intellectual property right (IPR) becomes invalidated, the invalidation is retroactive. Yet, in a case involving a license agreement signed before the invalidation of the licensed patent, the Supreme Court ruled that the licensor does not have the obligation to return to the licensee the portion of the royalty already paid under the valid license agreement, as the payment did not amount to an unfair profit. To put it differently, the Supreme Court found it fair for a licensor (under a license agreement) to receive royalties before its patent registration is invalidated, but would not recognize the right to receive royalties once the patent is invalidated. There are no decisions covering other types of IPR but the principle set forth in the above Supreme Court decision is likely to apply in those cases.

Unregistered rights

  1. Can unregistered trademarks, or other intellectual property rights that are not registered, be licensed in your jurisdiction?

Regarding trademark rights, the Korean Trademark Act adopts the ‘first to file’ and ‘registration’ rule, and accordingly, a person who registers his or her trademark with the Korea Intellectual Property Office (KIPO) will have an exclusive right to such trademark. Accordingly, an unregistered trademark, in principle, does not have an exclusive right and therefore, may not be licensable to third parties. That being said, even if trademarks are unregistered in accordance with the Trademark Act, if they are widely known in Korea, third parties may be prevented from registering or using identical or similar trademarks under the Unfair Competition Prevention and Trade Secret Protection Act. Thus, in such a case, licensing an unregistered but widely known trademark may be possible.

For patents, licensing would require the completion of a patent application and registration in Korea. Therefore, unregistered patents may not be licensed to third parties.

Copyrights are recognized although not registered. Trade secrets also do not require registration. Accordingly, even if copyrights and trade secrets are not registered, licensing these intellectual properties is possible.

Security interests

  1. Are there particular requirements in your jurisdiction to take a security interest in intellectual property?

According to the Patent Act of Korea, the consent of a patent holder is required for the establishment of a security interest (pledge) in a license. A security interest (pledge) in a patent right or an exclusive license becomes effective only when it is registered with the KIPO and a security interest (pledge) in a non-exclusive license does become effective even without registration with the KIPO but would have force and effect against a third party only when registered with the KIPO.

The details concerning the establishment of a security interest (pledge) in utility model rights and design rights and the effectiveness of the registration thereof are the same as those for patent rights. However, in the case of the establishment of a security interest (pledge) in an exclusive license of trademark rights, unlike patent rights, the registration thereof to the KIPO is not required for it to become effective but still is required to have force and effect against a third party.

In the case of copyrights, it is possible to create a security interest (pledge) in the author’s property rights and exclusive rights of publication and, unless it is registered with the copyright register, it cannot have force and effect against a third party.

Proceedings against third parties

  1. Can a foreign owner or licensor of intellectual property institute proceedings against a third party for infringement in your jurisdiction without joining the licensee from your jurisdiction as a party to the proceedings? Can an intellectual property licensee in your jurisdiction institute proceedings against an infringer of the licensed intellectual property without the consent of the owner or licensor? Can the licensee be contractually prohibited from doing so?

A licensor may file an injunctive action against a third-party infringer without the consent of the licensee.

Whether a licensee may bring such actions depends on whether the licensee is an exclusive licensee or a non-exclusive licensee. An exclusive licensee, in principle, may decide on his or her own to file an injunctive action against an infringer. That being said, the rights of an exclusive licensee may be restricted by the license agreement. To restrict the rights of the exclusive licensee, the restrictions must be registered with the KIPO.

Unlike an exclusive licensee, a non-exclusive licensee only has a right to deploy an invention; a non-exclusive licensee does not have the right to seek an injunction against a third party in his or her name. Only the licensor will be allowed to file an infringement action.

Sub-licensing

  1. Can a trademark or service mark licensee in your jurisdiction sub-license use of the mark to a third party? If so, does the right to sub-license exist statutorily or must it be granted contractually? If it exists statutorily, can the licensee validly waive its right to sub-license?

A trademark or service mark licensee can sub-license the use of the mark to a third party only if the licensee has obtained the licensor’s consent to sub-license. The Korean Trademark Act provides that, unless there is the consent of a licensor, a licensee is not allowed to grant a sub-license of its right to the relevant trademark or service mark under the license agreement to a third party. In other words, a licensor’s consent would be necessary to sub-license use of a trademark or service mark.

Jointly owned intellectual property

  1. If intellectual property in your jurisdiction is jointly owned, is each co-owner free to deal with that intellectual property as it wishes without the consent of the other co-owners? Are co-owners of intellectual property rights able to change this position in a contract?

When a patent right or a trademark right is co-owned by two or more persons, a co-owner must obtain the consent of each of the other co-owners before he or she assigns his or her ownership interest to any third party or pledges the ownership interest to a third party as collateral. If a co-owner wishes to license his or her rights, whether exclusively or non-exclusively, he or she may do so only with the consent of other co-owners. Unless specifically stipulated otherwise by contract, any co-owner of a patent right or trademark right may practice a patent invention or trademark related thereto without obtaining the consent of other co-owners.

In the case of a copyright, any work that was jointly created and owned by two or more persons and that cannot be used by separating the part that each creator has contributed, each creator or co-owner may not exercise his or her rights without obtaining a universal agreement from the other copyright holders. Furthermore, as with patents and trademarks, if a co-creator wishes to assign or pledge as collateral his or her ownership interest in the copyright, in order to do so, he or she must obtain the consent of other co-owners.

First to file

  1. Is your jurisdiction a ‘first to file’ or ‘first to invent’ jurisdiction? Can a foreign licensor license the use of an invention subject to a patent application but in respect of which the patent has not been issued in your jurisdiction?

Korea is a ‘first to file’ jurisdiction. It is not possible to enter into a license agreement for the use of an invention in Korea subject to a patent application for which a patent has not yet been issued in Korea.

Scope of patent protection

  1. Can the following be protected by patents in your jurisdiction: software; business processes or methods; living organisms?

Before 1 July 2014, software inventions could be protected by claims for method, apparatus or recording medium. On and after 1 July 2014, the scope of protection has become wider as software inventions can also be protected by claims for a computer program (or application) stored in a medium.

Regarding business methods, they are in and of themselves not recognized as inventions as they do not use the principle of nature; however, if their connection to particular goods is recognized, they may qualify as an invention. In this regard, for an invention of business processes or methods to be patented, in addition to the general requirements for patent registration (e.g, novelty, non-obviousness and industrial applicability (similar to utility)), their connection through bonding or coupling with hardware, including computers, must be recognized.

An invention involving living organisms is patentable if it involves microorganisms, plant or animal organisms; however, any invention relating to human beings may be partly restricted. An invention in medical treatments (treatment on or medical diagnosis of human beings) is deemed to lack industrial applicability, and thus, is not eligible for patent. Methods of processing any substance generated by humans or collected from humans that have industrial use may be patented if they can be distinguished from medical treatment.

Trade secrets and know-how

  1. Is there specific legislation in your jurisdiction that governs trade secrets or know-how? If so, is there a legal definition of trade secrets or know-how? In either case, how are trade secrets and know-how treated by the courts?

In Korea, trade secrets and know-how are protected under a separate body of law known as Unfair Competition Prevention and Trade Secret Protection Act. According to this Act, the term ‘trade secrets’ means ‘information, including a production method, sale method, useful technical or business information for business activity, that is not known publicly, has been managed as secret information, and has independent economic value’.

The Korean Civil Procedure Act provides that the court may limit the disclosure of information upon the request of a party if the records of the trial include a trade secret. Also, the court may choose to review certain information that a party claims as trade secrets without disclosing it to the other party by proactively exercising its discretionary power over the proceeding.

  1. Does the law allow a licensor to restrict disclosure or use of trade secrets and know-how by the licensee or third parties in your jurisdiction, both during and after the term of the license agreement? Is there any distinction to be made with respect to improvements to which the licensee may have contributed?

The licensor may prohibit the disclosure of trade secrets and know-how not only during the license term but also after the expiry or termination of the term by agreement. However, regarding the confidentiality obligations after the expiry or termination of the term of the agreement, the courts may require reasonableness in the restriction. Accordingly, the disclosure may be prohibited for a shorter period than provided in the agreement.

Concerning certain trade secrets, if a licensee makes improvements, and the improvements are recognized as falling within the purview of the trade secrets of the licensor, the licensee’s use of the improvements may also constitute a use of the original trade secrets. Similar to trade secrets and know-how discussed above, the licensor may also prohibit the disclosure of the improvements made by the licensee during the term or after the termination of the agreement.

Copyright

  1. What constitutes copyright in your jurisdiction and how can it be protected?

Copyright may be classified as follows:

  • the author’s moral rights, including the right of publication, the right of attribution and the right to the integrity that cannot be transferred to a third party or waived; or
  • the author’s proprietary rights, including the right of reproduction, public performance, public aerial transmission, exhibition, leasing and production of derivative works.

In addition, the Copyright Act recognizes neighboring rights, including the right of a stage performer, record producer and broadcaster.

SOFTWARE LICENSING

Perpetual software licenses

  1. Does the law in your jurisdiction recognize the validity of ‘perpetual’ software licenses? If not, or if it is not advisable for other reasons, are there other means of addressing concerns relating to ‘perpetual’ licenses?

Korean law does not specifically regulate the software license period. However, if a long-term license agreement is entered into by the licensor abusing its superior bargaining power, such an act would be considered as an unfair trade practice and may be limited or restricted in accordance with the Korean Monopoly Regulation and Fair Trade Act (MRFTA).

Legal requirements

  1. Are there any legal requirements to be complied with prior to granting software licenses, including import or export restrictions?

There is no separate statutory restriction related to software licenses. Also, import and export restrictions by Korean law are generally restrictions on goods, and therefore, generally do not apply to software licenses. However, the import and export of software can be restricted or banned, for example, when necessary to maintain international peace and security or to protect and conserve the life, health and safety of people, life and health of animals and plants, or environmental and domestic resources.

Restrictions on users

  1. Are there legal restrictions in your jurisdiction with respect to the restrictions a licensor can put on users of its software in a license agreement?

The Copyright Act stipulates that where any person who uses a program with legitimate authority cannot easily obtain the necessary information for compatibility and it is inevitable for him or her to obtain the information, he or she may perform decompilation of program codes without obtaining permission from the copyright holder. Also, the Act specifies that any person who possesses and uses a copy of a program with legitimate authority may reproduce the relevant copy to the extent necessary to protect against destruction, damage or deterioration of the copy. There is no court precedent that has ruled on whether a copyright owner may restrict the above-stated decompilation and reproduction of a program by a licensee, but there exist judicial opinions stating that complete restrictions are not allowed. Therefore, this issue requires attention when drafting license agreements.

ROYALTIES AND OTHER PAYMENTS, CURRENCY CONVERSION AND TAXES

Relevant legislation

  1. Is there any legislation that governs the nature, amount or manner or frequency of payments of royalties or other fees or costs (including interest on late payments) in an international licensing relationship, or require regulatory approval of the royalty rate or other fees or costs (including interest on late payments) payable by a licensee in your jurisdiction?

The Review Policy on Unfair Exercise of Intellectual Property Rights prohibits a licensor from collecting an ‘unfair’ amount of royalties, but other than that, there is no legislation that regulates the calculation of royalties or other fees or costs. Generally, the parties may freely determine the amount and payment schedule of royalties through separate agreements.

Meanwhile, if a licensee is late in the payment of royalties, an annual 6 per cent interest rate prescribed by the Korean Commercial Code may be applied, unless separately agreed upon between the licensor and licensee.

Restrictions

  1. Are there any restrictions on transfer and remittance of currency in your jurisdiction? Are there any associated regulatory reporting requirements?

The law that applies to foreign exchange transactions and other foreign transactions is the Foreign Exchange Transactions Act (FETA). According to the FETA, any transaction relating to origination of claims constitutes a capital transaction, and any person who desires to engage in a capital transaction must report the transaction to the Minister of Strategy and Finance before payment or receipt on claims or debts.

Taxation of foreign licensor

  1. In what circumstances may a foreign licensor be taxed on its income in your jurisdiction?

The royalty income of a foreign licensor is taxable under the Corporate Tax Act of Korea, and is considered a domestic source income if: (1) the licensed intellectual property right is used in Korea; or (2) the royalty is paid in Korea. Under the same act, if a foreign licensor has no place of business in Korea, the licensee must withhold 20 per cent of the taxable royalty income as corporate tax.

However, if a foreign licensor is based in a country bound by a tax treaty with Korea, the royalty income that is normally taxable under the Corporate Tax Act of Korea may become non-taxable in accordance with the conditions set forth in the tax treaty. For example, the Korean Supreme Court ruled that if a licensed intellectual property right is registered only in the United States and not in Korea, the royalty income of the US licensor is not taxable in Korea given the interpretation of the US–Korea tax treaty.

COMPETITION LAW ISSUES

Restrictions on trade

  1. Are practices that potentially restrict trade prohibited or otherwise regulated in your jurisdiction?

In Korea, the Monopoly Regulation and Fair Trade Act (MRFTA) has been enacted and enforced to prevent the abuse of market dominance and excessive concentration of economic power in enterprises and regulate illegal acts of collusion and unfair trade practices. Also, the Korea Fair Trade Commission, Korea’s competition agency, prosecutes the abuse of market dominance, illegal acts of collusion, unfair trade practices and may order corrective measures or impose penalties.

Legal restrictions

  1. Are there any legal restrictions in respect of the following provisions in license agreements: duration, exclusivity, internet sales prohibitions, non-competition restrictions and grant-back provisions?

In Korea, there is no law that directly restricts or limits the terms of a license agreement. However, if the terms indicate an abuse of market dominance, illegal acts of collusion, or unfair trade practices, they may not be enforceable under the MRFTA.

The main consideration in determining enforceability under the MRFTA is whether the exercise of intellectual property rights (IPRs), including granting of a license, hinders competition of the related goods, technology, or research and development among current or potential market participants.

In particular, in connection with the payment of license fees, any of the following constitutes a violation of the MRFTA:

  • unfairly collaborating with other enterprises to decide, maintain or change the license fees;
  • unfairly imposing discriminatory license fees depending on the counterparty;
  • unfairly demanding license fees that include fees for the portion of the licensed technology that is not used;
  • unfairly imposing license fees for the period beyond the duration of the patent right; and
  • unilaterally deciding or altering the method of calculating license fees without prescribing the calculation method in the contract.

Also, a licensor’s unreasonably refusing to enter into a license agreement with a particular enterprise, unfairly limiting the scope of licensee’s right, and imposing unreasonable and irrelevant conditions when granting a license, can be deemed a violation of the MRFTA.

IP-related court rulings

  1. Have courts in your jurisdiction held that certain uses (or abuses) of intellectual property rights have been anti-competitive?

Yes. Korean courts have held that if an exercise of IPRs is beyond the justifiable scope and constitutes an abuse of market dominance and unfair trade practices, such an exercise would be construed as a violation of the MRFTA.

INDEMNIFICATION, DISCLAIMERS OF LIABILITY, DAMAGES AND LIMITATION OF DAMAGES

Indemnification provisions

  1. Are indemnification provisions commonly used in your jurisdiction and, if so, are they generally enforceable? Is insurance coverage for the protection of a foreign licensor available in support of an indemnification provision?

Indemnification provisions are commonly used in Korea and are generally enforceable. Among others, the parties may determine in advance the amount of damages payable in the event of non-performance of an obligation, but if such amount is deemed unduly excessive, the court may reduce it to a more reasonable and appropriate amount.

Insurance coverage for the protection of a foreign licensor in support of an indemnification provision is allowed under Korean law.

Waivers and limitations

  1. Can the parties contractually agree to waive or limit certain types of damages? Are disclaimers and limitations of liability generally enforceable? What are the exceptions, if any?

In accordance with the principle of freedom of contract, the parties may contractually agree to waive or limit certain types of damages that may occur in connection with the contract. Korean courts generally respect the terms agreed to by the parties, barring an unusual situation.

However, if the waiver or limitation of damages is considered excessive or abusive, thus constituting unfair trade practices, it may be unenforceable under the Monopoly Regulation and Fair Trade Act (MRFTA).

TERMINATION

Right to terminate

  1. Does the law impose conditions on, or otherwise limit, the right to terminate or not to renew an international licensing relationship; or require the payment of an indemnity or other form of compensation upon termination or non-renewal? More specifically, have courts in your jurisdiction extended to licensing relationships the application of commercial agency laws that contain such rights or remedies or provide such indemnities?

Under the Review Guidelines for Unfair Exercise of Intellectual Property Rights, refusing to grant a license to a particular individual or entity with no justifiable reason is not allowed as it constitutes an unfair trade practice having anti-competitive effects. In addition, a licensor unilaterally terminating the license agreement without granting an appropriate grace period, for reasons other than the licensee’s inability to pay royalties, may also be considered an unfair trade practice.

Impact of termination

  1. What is the impact of the termination or expiration of a license agreement on any sub-license granted by the licensee, in the absence of any contractual provision addressing this issue? Would a contractual provision addressing this issue be enforceable, in either case?

If a license agreement expires or is otherwise terminated, the relevant sub-license agreement granted by the licensee will also be terminated in the absence of any contractual provision addressing this issue, barring unusual circumstances, such as when the licensor has consented to the validity of the sub-license despite the termination of the license agreement. It is possible to include a contractual provision addressing this issue and such a provision would be generally enforceable.

BANKRUPTCY

Impact of licensee bankruptcy

  1. What is the impact of the bankruptcy of the licensee on the legal relationship with its licensor; and any sub-license that the licensee may have granted? Can the licensor structure its international license agreement to terminate it prior to the bankruptcy and remove the licensee’s rights?

If a licensee continuously fails to pay the license fees due to bankruptcy, the licensor may seek to terminate the license agreement, and if the license agreement is terminated, the relevant sub-license agreement granted by the licensee would be deemed terminated, barring unusual circumstances. However, in the relevant rehabilitation proceeding, the court may restrict the termination of the license agreement if the license is considered essential in the preservation and continuation of the licensee’s business.

Impact of licensor bankruptcy

  1. What is the impact of the bankruptcy of the licensor on the legal relationship with its licensee; and any sub-license the licensee has granted? Are there any steps a licensee can take to protect its interest if the licensor becomes bankrupt?

There is no Korean law that specifically addresses this issue. However, it should be noted that even after a licensor’s intellectual property right is transferred to a third party over the course of the bankruptcy proceedings, the relevant license or sub-license would continue to be effective if it is registered.

GOVERNING LAW AND DISPUTE RESOLUTION

Restrictions on governing law

  1. Are there any restrictions on an international licensing arrangement being governed by the laws of another jurisdiction chosen by the parties?

No. Under the Act on Private International Law, the parties are allowed to choose the laws of another jurisdiction as the governing law of their international licensing agreement.

Contractual agreement to arbitration

  1. Can the parties contractually agree to arbitration of their disputes instead of resorting to the courts of your jurisdiction? If so, must the arbitration proceedings be conducted in your jurisdiction or can they be held in another?

The parties may contractually agree to resolve their disputes through arbitration instead of court trial but need to do so in writing, whether in the form of a separate agreement or in the form of an arbitration clause in a contract. Otherwise, an agreement to arbitrate may not be enforceable.

Arbitration proceedings may be conducted both in and outside of Korea. In Korea, arbitration proceedings may be conducted through Korean Commercial Arbitration Board (KCAB), which is an arbitral institution that mostly handles commercial disputes between corporations.

Enforceability

  1. Would a court judgment or arbitral award from another jurisdiction be enforceable in your jurisdiction? Is your jurisdiction party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards?

A final and conclusive court judgment or arbitral award from another jurisdiction is generally valid and enforceable in Korea if it satisfies all of the following requirements:

  • the international jurisdiction of such foreign court is recognized under the principle of international jurisdiction pursuant to the statutes or treaties of Korea;
  • the defeated defendant is served, by a lawful method, a written complaint or document corresponding thereto, and notification of date or written order allowing him or her sufficient time to defend, or that he or she responds to the lawsuit even without having been served such documents;
  • the approval of such final judgment, et cetera, does not undermine sound morals or other social order of Korea in light of the contents of such final judgment, et cetera, and judicial procedures; and
  • mutual guarantee exists, or the requirements for recognition of final judgement, et cetera, in Korea and the foreign country to which the foreign county court belongs are not far off balance and have no actual difference between each other in important points.

Korea is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention), so arbitral awards rendered in other countries that are party to the Convention would generally be recognized as valid and enforceable in Korea, subject to the conditions and requirements set forth in the Convention.

Injunctive relief

  1. Is injunctive relief available in your jurisdiction? May it be waived contractually? If so, what conditions must be met for a contractual waiver to be enforceable? May the parties waive their entitlement to claim specific categories of damages in an arbitration clause?

Injunctive relief is available in Korea and is rendered in the form of a court order. Parties may contractually waive the right to pursue injunctive relief or waive their entitlement to claim specific categories of damages in an arbitration clause. However, such a waiver may not be enforceable if it renders the contract manifestly unfair against one party.

UPDATES & TRENDS IN LICENSING IN SOUTH KOREA

Key developments of the past year

  1. Please identify any recent developments in laws or regulations, or any landmark cases, that have (or are expected to have) a notable impact on licensing agreements in your jurisdiction (including any significant proposals for new legislation or regulations, even if not yet adopted). Explain briefly how licensing agreements might be affected.

There was no development that may have a notable impact on licensing agreements in Korea during the past year.

* The information in this chapter was accurate as of December 2023.

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