On March 11, 2021, the Korea Fair Trade Commission ("KFTC") imposed sanctions for abuse of intellectual property rights ("IPR") against a Korean pharmaceutical company ("Company"), which were the first such sanctions issued by the KFTC for so-called sham patent infringement litigation. Specifically, the KFTC imposed a corrective order and an administrative fine of KRW 2.297 billion (roughly USD 2 million) on the Company (patentee) for (i) unfairly interfering with the business activities of a generic company by filing a preliminary injunction action even though the Company knew there was no infringement of its patent ("Conduct 1"), and (ii) unfairly interfering with the business activities of another generic company by filing a patent infringement action after obtaining another patent based on fraudulent data ("Conduct 2"). The Company was also referred for criminal investigation. The KFTC determined that these acts constituted unfair solicitation of customers, a type of unfair trade practice, in violation of the Monopoly Regulation and Fair Trade Law ("FTL"). 

The published written decision indicates the following reasons for which the KFTC recognized a violation of the FTL in this case.

• With respect to Conduct 1, the KFTC determined that the Company was aware of test results that indicated the generic product was not within the scope of the relevant patent prior to filing a preliminary injunction action for infringement of the patent. The KFTC further noted that the Company proceeded to file the action shortly before the start of the year, when large hospitals conduct their tendering processes, and actively notified such hospitals that the supply of generic drugs subject to the patent dispute might be suspended.
• With respect to Conduct 2, the KFTC found that the Company manipulated or falsified data in order to obtain its formulation patent, including bioequivalence tests. The Company then used this patent to file an infringement action, and publicized the infringement action in its promotional activities, thereby unfairly inducing customers to transact with the Company. 

Significantly, the sanctions decision was issued on the basis of unfair trade practices under the FTL (i.e., unfair solicitation of customers). This is contrast to the KFTC's usual practice of enforcing IPR abuse as an abuse of market dominant position. This case indicates that the KFTC believes that engaging in IPR abuse, regardless of market position, can constitute the "use of unfair competitive means to disrupt proper competition order," and therefore can be found to be an unfair trade practice in violation of the FTL. While the KFTC's press release indicated that there are currently no other similar active investigations pending, it made clear that the KFTC plans to continue monitoring the pharmaceutical industry closely for abuse of patent rights by originator drug companies. 

Following the KFTC sanctions order, the Korean Intellectual Property Office (KIPO) requested that the Prosecutor's Office investigate the Company for possible violation of Article 229 of the Patent Act, which provides that any person who obtains a patent by fraud or other improper means shall be subject to criminal punishment. KIPO also filed an invalidation action against the Company's patent based on falsified data relating to Conduct 2.

This decision suggests that patent infringement disputes will increasingly involve the risk of FTL issues being raised as well in Korea, so companies would be well-advised to carefully evaluate FTL risks in any patent enforcement action in Korea going forward.