Korea's KFTC Issues New IPR Guidelines Covering SEPs

August 30, 2016

20150814_154034Korea’s KFTC- At The Crossroads Between Antitrust and Intellectual Property

In 1995, the United States Department of Justice (DOJ) published guidelines for providing guidance regarding the application of antitrust principles to intellectual property agreements covering the licensing of intellectual property rights. The Antitrust Guidelines for Licensing of Intellectual Property (the “1995 Guidelines”) set the stage for the antitrust review of intellectual property in the US.  The 1995 Guidelines, focused on the principle that intellectual property was neither primarily free from antitrust scrutiny nor free of antitrust scrutiny.  Therefore, in the US, an analysis of intellectual property related agreements (patent licensing agreements, etc.) normally relies on a determination of whether the agreement unlawfully retrains trade and whether there has been a clear case of misuse by the licensor or licensee.

Over the last few years, Korea’ s antitrust enforcement agency or regulator ( the KFTC) has become very active in not only enforcing Korea’s antitrust and unfair business practices regulations but in expanding the scope of antitrust analysis in lock step with its western counterparts, especially the DOJ in the US. Such antitrust expansion also included the application of antitrust review to intellectual property agreements, especially patents.

In Korea, the KFTC, wanting to showcase its sophistication, has also issued guidelines on intellectual property rights (IPR) as applied to antitrust review. In fact, claiming it will revamp its guidelines every 2-3 years, the KFTC has just released new IPR guidelines (the “IPR Guidelines”) covering the use or misuse of standard essential patents (SEPS). SEPs have been the subject of antitrust review and regulation in Europe as well as other jurisdictions.  Until recently, de facto SEPS ( technology which has become standard as a result of normal market competition -  i.e. Blu-ray vs. HD)  has been treated the same as SEPs ( technology which has become standard technology adopted by standard setting organizations- such as cell phone patents adopted as standard by the IEEE). However, the KFTC, in a move to become more aggressive and to set itself apart from some antitrust enforcement agencies, has distinguished between SEPs and de facto SEPs in its IPR Guidelines.

By stating in the IPR Guidelines that de facto SEPs are different SEPs , the KFTC has acknowledged that the regulatory requirements for antitrust review will not be the same. In essence a different illegality standard will be placed on de facto SEPs as opposed to SEPs in general to avoid excessive restrictions on widely used technology that has not been adopted by standard setting organizations.  Therefore, the antitrust review by the KFTC of international SEPs and international de facto SEPs will not be the same as the review provided by the DOJ.

The main issue the KFTC will focus on when reviewing SEPS and de facto SEPs for antitrust violations is whether the license application for using SEPs or de facto SEPs has been improperly or unfairly refused. When analyzing the refusal, the KFTC will look at three main concerns:

  1. The intention of the licensor to reject the licensee’s application for the licensee to use the SEP;
  2. The competitive restraints on competition flowing from the refusal to grant the license; and
  3. The access to alternative technologies or SEPs or de facto SEPS the licensee may have.

Distinguishing between the SEPs and de facto SEPS sets the KFTC apart from other antitrust enforcement agencies and signals the KFTC’s willingness to push the boundaries of antitrust law when applied to IPR related agreements. Though some courts and regulatory agencies are considering whether a patent holder ‘s voluntary commitment to a standard –setting organization ( SSO) leads to antitrust liability, the KFTC has determined antitrust liability may exist regardless of whether  a SEP or de facto SEP  is in question.  This may open the door to antitrust exposure in numerous industries ranging from telecommunications and IoT to pharmaceuticals and healthcare.

The KFTC has signaled to the world that it is ready and willing to conduct an antitrust review as aggressively as possible and by virtue of its own IPR Guidelines has indicated a willingness to forge ahead into a brave new world.

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