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Patent License Agreement in Korea – What Happens to Royalty Payment When the Patent Later Becomes Invalidated

Korean Law OfficeThere is no doubt that intellectual property is a valuable asset and parties all around the world are dealing with an arrange of utilizing 3rd party’s intellectual properties.  Sometimes it could be a license or sometimes a transfer.  In any case it is very important to verify the validity of the underlying intellectual property before entering into a contract.  As for a patent, first it looks relatively simple compared to other intellectual property such as a copyright to clear this issue because a patent is being registered with the Korean Intellectual Property Office.  The registration, however, does not guaranty the validity of the patent at issue.  It can be challenged later by 3rd party and could be nullified by the court’s decision.  Then what happens if the patent becomes void after the license agreement is entered into?  The Korean Patent Act provides that if a court’s decision invalidating a patent becomes final and conclusive, the patent shall be deemed never to have existed.  Then what happens to the royalty previously paid by the licensee?  Does the licensee can refuse to pay the royalty after the patent gets invalidated and even ask for the refund of the royalties previously paid pursuant to the patent license agreement?  The Supreme Court of Korea said No.
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