Supreme Court Establishes Factors for Reasonable Royalty Rate The Korean Supreme Court handed down a landmark ruling April 27 2006, establishing a list of factors that must now be considered when calculating the reasonable royalty rate in all patent infringement cases. The basis for this change stems from case 2003?15006, in which a patent right holder, the plaintiff, licensed use of a patented process for manufacturing a CD stamper to multiple licensees. The patent right was meanwhile being infringed by the defendant in the case, and the plaintiff sought damages in accordance with Article 128(3) of the Korean Patent Act. Article 128(3) states that in a case where a person has intentionally or negligently infringed a patent right or exclusive license, a patentee or exclusive licensee can claim the pecuniary amount that the patentee would normally be entitled to receive for working the patented invention as the amount of damage suffered by the patentee. Though Article 128(3) allows such a recovery, no set factors existed for consideration when calculating the reasonable royalty rate, often causing inconsistent rulings. However, with this case the Supreme Court established clear guidelines, using factors that were previously being applied arbitrarily, including: value of the technology involved in the invention, terms and conditions of previous license agreements with the infringer, royalty rates for licensing a similar invention in the industry, the remaining patent term, utilization of the invention by the patentee, existence of alternative technology and profits received by the infringer. In addition to these, the Court went a step further by including two unprecedented factors for consideration: terms and conditions of any license agreement between the patentee and a third party, and, should the plaintiff demonstrate it to be rational, the royalty rate of that third party license agreement ? in which case the infringer then has the burden to prove it irrational. The ruling sets a new precedent for infringement cases. Never before have Korean courts referred specifically to an established list of factors when calculating reasonable royalty rates. More importantly, calculating reasonable royalty rates has become much more comprehensive, benefiting the patentee since courts are willing to consider royalty rates applied to their other licensees. The result: the Court sided with the plaintiff, awarding £Ü882,129,970 ($ 880,000), and in doing so firmly established these new principles as a list of factors for consideration. © 2006 Euromoney Institutional Investor PLC. " Written by David Hunjoon Kim and Doo-Sang Kwon of YOU ME Patent & Law Firm Appearing in the July issue of Managing Intellectual Property.