SOUTH KOREA Trends and Developments Contributed by: Samuel Lee, Ye In Han, Inkyoung Choi and Jaeyoung Seol, Bae, Kim & Lee LLC
nological advancement. Since the clinical trials were conducted in Russia, the plaintiff claimed that the defendant could not invoke a domestic exemp ‑ tion for foreign research activities. They posited that allowing this would turn Korea into a safe
The Court expressed a significant policy concern regarding potential loopholes. It reasoned that if outsourced production were broadly exempted, any manufacturer could mass-produce patented goods and sell them for profit under the pretext of supplying researchers. In the Court’s view, this would render pat ‑ ent rights toothless and allow competitors to stockpile commercial inventory disguised as research supplies. The “subjective purpose” test Furthermore, the District Court applied a subjec ‑ tive test to the “purpose” of the act: it looked at the defendant’s motive. Since the defendant was not the entity filing for the drug approval in Russia, but rather the supplier, the Court concluded that the defendant’s immediate purpose was export (a commercial activ ‑ ity), not research. Under this logic, the separation of the researcher (company M) and the manufacturer (defendant) was fatal to the defence. The Supreme Court ruling: embracing industrial reality The case was appealed to the Intellectual Property High Court (Case No 2023Na10914), which over ‑ turned the lower court’s decision. This reversal was subsequently affirmed by the Supreme Court (Case No 2025Da202970). The higher courts rejected the rigid formalism of the first instance, adopting a teleological interpretation focused on the purpose of the patent system – which is to promote innovation and the utilisation of inven ‑ tions. Recognition of industrial division of labour The Supreme Court explicitly recognised the reality of the modern pharmaceutical industry, where spe ‑ cialisation is the norm. Few companies – especially biotechs and biosimilar developers – possess end- to-end capabilities for drug discovery, development, clinical trials, and commercial manufacturing. The Court ruled that limiting the exemption only to cases where the researcher and the producer are the same entity would be anachronistic. It held that: “The Patent Act does not mandate that the researcher and the producer must be the same person. If the
haven for global infringement. The defendant’s legal defence
The defendant countered by invoking the statutory exemption under Article 96 (1)(i), urging the court to look beyond the formalities of export and focus on the substantive nature of the activity. Their defence relied on two main arguments. • The “inextricable link” to research: The defendant argued that in the modern pharmaceutical industry, manufacturing and research are often bifurcated. They contended that their production was inex ‑ tricably linked to the clinical trials conducted by company M. Without their production, the research – which is legally encouraged by the Patent Act – could not take place. Therefore, the production itself should be viewed as a necessary component of the research process, regardless of who physi ‑ cally conducted the trials. • Non-commerciality: To refute the claim of com ‑ mercial intent, the defendant emphasised that the transfer was non-commercial. The samples were provided free of charge and strictly for data gen ‑ eration purposes. They argued that “export” in the Patent Act implies a commercial transfer of value, which was absent in this transaction. The District Court ruling: a victory for strict formalism The case first proceeded in the Seoul Central District Court (Case No 2020GaHap591823), which ruled in favour of the patent holder. This ruling sent shock ‑
waves through the CDMO industry. Rationale: the “loophole” concern
The District Court adopted a strict constructionist view. It reasoned that the exemption in Article 96 (1)(i) is an exception to the fundamental property rights of the patent holder and thus must be interpreted nar ‑ rowly.
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