Introduction

As the term ‘original patent’ lacks any specific legal meaning, it is among the potentially misleading terms misused in the marketplace. However, the Fair Trade Commission (hereafter ‘FTC’) have recently ruled that an ad claiming ownership of an ‘original patent’ constitutes an unfair indication or advertisement, in doing so also specifying the requirements for claiming an ‘original patent’.

Relevant Law

The Korean Fair Labeling and Advertisement Act (hereafter ‘the Act’) prohibits any form of labeling or advertising that is likely to deceive or mislead consumers. Specifically, Article 3-1-1 of the Act stipulates that acts of false or exaggerated labeling/advertising are considered unfair, and Article 3-1 of the Enforcement Decree relating to the Act defines false/exaggerated advertisements as those which differ from reality or inflate facts.

Facts of the Case

Party A holds a registered patent relating to a film-type leak point sensor(*) utilizing a specific printing technique, with the scope of their rights limited to said technique. Despite the existence of other domestic and foreign patents relating to film-type leak point sensors prior to the registration of Party A’s patent, Party A advertised on their website that they have the ‘original patent’ for film-type leak point sensors.

* Leak point sensors detect the leakage of various liquids (water, oil, chemicals etc.) and identify the location of the leak. They are used to prevent harm to human life or damage to property that could occur due to the leakage of hazardous chemicals in industrial facilities, etc.

Decision

In their decision (Case 2018Seoso1572), the FTC stated that Party A’s actions constituted an act of exaggerated advertising which could mislead consumers and hinder fair trade. The grounds of the decision are summarized below:

(1) Exaggeration

The FTC recognized the advertisement as being exaggerated based on:

• The term ‘original patent’ would normally refer to the core patent which forms the basis of high added-value creation in a specific field.
• In Party A’s patent, the specific printing technique was recognized as having an inventive step over an existing film-type leak point sensor invention to which it was compared. However, other elements could be easily derived from the existing invention.
• Party A has not provided its technology to competitors, who manufacture and sell general film-type leak point sensors not utilizing the specific printing technique of Party A’s patent.

(2) Consumer confusion

There is a risk that consumers viewing the advertisement would be misled into believing that Party A has the patent for all film-type leak point sensor products.

(3) Hindering of fair trade

Whether or not a purveyor has the original patent in the leak point sensor field would be an important factor when considering a purchase, so there is a risk of consumers’ rational decision-making and the fair trade order being hindered.

Take-aways

In this case, Party A suggesting that they held the original patent for all kinds of film-type leak point sensors, despite the scope of their patent only extending to products utilizing a specific printing process, was considered exaggerated advertising. In more general terms, it may be said that it is an act of unfair labeling/advertising to suggest that an ‘original patent’ is held for technology beyond the limited scope of that covered by a registered patent.

Following this decision, we may expect the FTC to now respond more actively when presented with advertisements relating to an ‘original patent’. In the case we have discussed, only suspension and prohibition orders were imposed on Party A, but the severest penalties allowed under law extend to up to two years’ imprisonment or a fine of up to 150 million won (approx. $130,000 USD). Companies should thus take care when using the term ‘original patent’ in advertising copy.

Written by Ben YUU & Jae-sang LIM