SOUTH KOREA Law and Practice Contributed by: Ho Joon Moon, Sung Min Kim, Allen Hyungi Ryu and Joon Sung Hong, Lee & Ko
ted to take a seat on a JV company board while also taking a position as a JV participant. Notably, where a director/officer of a large company with worldwide assets or annual revenue of KRW2 trillion or more takes a seat on another company’s board, a business combination report may be required between the two companies. From a conflict-of-interests perspective, directors have a duty against self-dealing – ie, a director may not enter into a transaction with the company on their own account or on account of a third party, without the super-majority approval of the board (two thirds or more of all incumbent directors). Under the KCC, the prohibition on self-dealing has been expanded to cover major shareholders (ownership of 10% or more) and certain related parties. As a result, the covered parties are required to notify the board of such trans - action and must obtain the super-majority approval of the incumbent directors. In addition, the transac - tion and its process must be fair and at arm’s length. Furthermore, under South Korean case law, if an indi - vidual concurrently serves as the representative direc - tor of both companies, any transaction between the two companies is deemed to constitute self-dealing. Accordingly, if the representative director of a JV par - ticipant also serves as the representative director of the JV, any transaction between the JV and the par - ticipant would be subject to the self-dealing require - ments. If a director has a personal conflict of interest in respect of any matter subject to the board of direc - tors’ approval (eg, approval of remunerations payable to such director), the director will not be entitled to exercise their voting right in respect of such matter.
• scope of the IPs to be disclosed to the other JV partner; • whether the scope of the IPs to be assigned or licensed must be expanded as the relevant JV partner (who assigned or licensed the relevant IPs) develops similar or improved IPs; • who will own the derivative IPs (improvements, etc); • whether the JV and/or relevant JV partner (if not given the ownership of the derivative IPs) will be given a licence to use such IPs; • whether any warranty will be given in respect of the IPs being licensed/assigned; • whether the JV partners will be subject to any non- solicitation obligations in respect of the employees of the JV; • whether the employees of the JV will be subject to any non-compete obligations; and • work-for-hire clauses, where the JV will be required to appropriately compensate the relevant employee for the inventions. How IP Issues Are Usually Dealt With in the JV Agreement There is no “market” practice in relation to how IP issues are dealt with in the JV agreement. Regard - ing ownership of the derivative IPs, although there are cases where the JV and the relevant JV partner agree on co-ownership of such IPs, it is more typi - cal in practice for such IPs to be owned by the JV. It should be noted that either the JV or the JV partner will be able to freely use the relevant IPs under the co-ownership arrangement, but the other co-owner’s consent is required for the relevant IPs to be assigned or licensed to any third party. The JV partner that has assigned/licensed any IP to the JV may wish to seek a provision that requires, to the extent possible, that the JVC sell or make in- kind distribution of the assigned IPs, derivative IPs and other assets containing the relevant IPs to the JV partner that assigned/licensed the relevant IPs if it wishes to ensure that the IPs are not transferred to any third party.
8. IP and ESG 8.1 Ownership and Use of IP
Some of the key IP issues that should be considered when setting up a JV and in relation to a contractual collaboration are as follows: • scope of the IPs to be assigned, licensed or dis - closed to the JV;
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