FirstLaw is happy to announce that one of the authors, Kyeyoung Lee, a partner in our Electronics Group, has been appointed by the President as one of nine commissioners at the Korea Trade Commission (KTC) to serve a term of three years. This article presents remedies that can be sought by IPR holders before the KTC and the procedure therefor.

Overall Structure of the KTC

The KTC is a quasi-judicial agency in the Ministry of Trade, Industry and Energy, established under the Act on the Investigation of Unfair International Trade Practices and Remedy against Injury to Industry (Unfair Trade Investigation Act: UTIA) for the purpose of protecting domestic industries from unfair international trade practices, such as dumping, subsidized importation and the infringement of IP rights.

The KTC is composed of one chairperson and eight commissioners, and is supported in its administrative work by the Office of Trade Investigation, which consists of four divisions: Trade Remedy Policy Division, Damage Determination Division, Dumping Investigation Division and Unfair Trade Investigation Division.

Among the four, the Unfair Trade Investigation Division handles unfair trade activities resulting from IP infringement. The functions of the Unfair Trade Investigation Division are (i) to investigate unfair international trade practices, such as the infringement of IP rights, violation of rules of origin and other practices liable to disrupt good order in international trades; and (ii) to investigate the impact of international trades on the competitiveness of domestic industries.

Trade Remedy Measures

Trade remedy (TR) measures are means for protecting domestic industries under the WTO agreements, the UTIA and the Customs Act. In cases where domestic industries are suffering or are likely to suffer serious injuries as a result of unfair international trade practices, the injured parties may file a petition with the KTC seeking (i) levy of anti-dumping duties; (ii) imposition of countervailing duties; (iii) implementation of safeguard measures; or (iv) investigation of unfair international trade practices.

Investigation of Unfair International Trade Practice

Among the above TR measures, the fourth type of TR measure, i.e. investigation of unfair international trade practices, is used against the exporting or importing of IP infringing goods, as explained in detail below.

A. Types of unfair international trade practices

Unfair international trade practices are defined under Article 4(1) of UTIA as follows:

(i) Infringement of IP rights by importing goods violating IP rights into Korea, selling such imported goods domestically, exporting goods violating IP rights, or manufacturing such goods domestically for export;

(ii) False or misleading markings of origin by exporting or importing goods whose marks of origin are false, misleading, damaged or modified, or goods subject to origin markings but whose origins are not marked;

(iii) False or exaggerated markings of quality of exported/imported goods; and

(iv) Disrupting export/import by exporting or importing goods significantly different from those detailed in the contract to cause disputes.

B. Procedure for Unfair International Trade Practice Investigation

Anyone may file a petition for the investigation of unfair international trade practices with the KTC within two years from the occurrence of the act of unfair international trade. The KTC may also undertake an ex officio investigation, if necessary, when there is a reasonable suspicion of unfair international trade practices.

The petitioner should show that (i) the petitioner’s IP rights remain valid and in force; (ii) the petitioner’s IP rights have been infringed by the respondent; (iii) the respondent has conducted activities corresponding to the unfair trade practices, e.g. exporting, importing, etc.; and (iv) the activities were conducted within two years prior to the filing of the petition.

Circumstantial evidence may be sufficient for initiating the investigation by the KTC, since more concrete evidence on the infringing activities can be later supplemented by the request of the KTC to the Korea Customs Service (KCS). The KTC shall decide whether to commence the investigation within 20 days from the date of filing (Article 5 of the UTIA).

In case there appears to be irrevocable harm or a likelihood of irrevocable harm caused by unfair trade activities, the KITC may issue temporary relief in the form of cease-and-desist orders, including injunctions against export, manufacturing, import, sales of imported products and seizure/exclusion orders against the products, parts/raw materials and/or manufacturing facilities (Article 7 of the UTIA).

The KTC shall promptly complete the investigation within six months from the commencement decision, but the investigation period may be extended twice for up to four months, (i) where a lawsuit or patent trial associated with the unfair international trade act under investigation is pending; (ii) where the petitioner or the respondent requests an extension by presenting justifiable ground(s); and (iii) in other cases deemed necessary to extend the period for unavoidable reason(s) (Article 9 of the UTIA).

Therefore, it normally takes six to 10 months from commencement to reach a final decision.

[Investigation procedure]

If there is a finding of unfair international trade practice, the KTC may issue an order for corrective measures and/or impose penalty surcharges. The corrective measures include (i) cease-and-desist orders to stop activities of unfair international trade practice;

(ii) orders to prohibit entry into the market and destroy goods in stock; (iii) orders to publish an apology advertisement; (iv) orders to publicise the KTC’s corrective orders; and (v) other necessary measures to correct unfair international trade practices (Article 10 of the UTIA).

Any party who violates an order for temporary relief or corrective measures shall be punished by imprisonment of up to three years or a fine not to exceed 30 million won (approximately $26,115) (Article 40(2) of the UTIA).

The KTC may impose upon the relevant actors (i) a penalty surcharge not exceeding an amount equivalent to 30% of the annual transaction amount averaged for the recent three years when the unfair international trade practices involve activities of infringement of IP rights, false or exaggerated markings of quality and disrupting export/import; and (ii) a penalty surcharge not to exceed 300 million won when the unfair international trade practices involve false or misleading markings of origin (Article 11 of the UTIA).

Any party who objects to the KTC’s disposition may raise an objection to the KTC within 14 days from the notification of such disposition in case of temporary relief, or within 30 days from the notification of such disposition in case of corrective measures and penalty surcharge.

The KTC shall render a decision within 60 days from the opposition, and this period may be extended for up to 30 days if the decision cannot be made due to unavoidable circumstances, such as submissions of new evidence during the investigation. The party who raises an objection may file an administrative appeal before the administrative court, separately from the objection (Article 14 of the UTIC). However, the KTC decision is enforceable unless the court hearing the administrative action renders an order suspending the enforcement of the KTC decision until the outcome of its decision in the pending appeal case.

Advantages of the KTC Proceedings for IP Infringement

The KTC proceedings are often quick, simple and cost-effective since the petitioner can obtain the decision within about 10 months from the date of the commencement of the investigation. In particular, the KTC proceedings can be useful to secure early relief against the trafficking of goods infringing IP rights across the border, although the rights holder may eventually have to initiate court proceedings to recover damages.

The KTC’s corrective measure of a cease-and-desist order will have the same effect as a preliminary injunction; and, if it is not lifted during the appeal process, will have the same effect as a permanent injunction.

Once the KTC finds infringement of IP rights with respect to the accused goods, an order of the KTC to prohibit entry into the market of the infringing goods can be effectuated to other parties dealing in the same goods, regardless of the name of the provider, importer, or seller thereof, through the simple procedure of having the KTC acknowledge that the goods dealt in by these entities are identical to the infringing goods.

In practice, the KTC requests the KCS to provide information on the imported amount of the accused goods during its investigation. Therefore, such information is useful in determining the amount of monetary damages in a future main action.

The customers of the accused product, who wish to receive a stable supply of such goods, will be definitely affected by the prompt and strong effect of the KTC decision.

From FIRSTLAW LP

January 2022