The Supreme Court recently rendered landmark decisions that delimit the extent of the "freedom to operate" defense in relation to design matters (Supreme Court Case No. 2021Hu10473 and 2022Hu10012, February 23, 2023). 

Courts in Korea have long recognized a "freedom to operate" defense against claims of design infringement, in which an accused party can argue that its design is similar or identical to (or easily could have been conceived from) designs published prior to the filing date of the registered design being asserted, and therefore the accused party's use of the accused design does not infringe the registered design regardless of any similarities. 

Supreme Court Case No. 2021Hu10473 involved a dispute between two small business owners who were manufacturing and selling furniture. One of the parties, "Mr. A," owned a design registration for a bed headboard design, which he believed was being infringed by a bed frame sold by the other party, "Mr. B." Mr. A filed a scope confirmation trial against Mr. B at the Intellectual Property Trial and Appeal Board (IPTAB) for the purpose of determining whether the design of the bed headboard sold by Mr. B fell within the scope of protection of Mr. A's design registration. In response, Mr. B filed an invalidation action against Mr. A's asserted design.

In the scope confirmation trial, at the first level of appeal before the Intellectual Property High Court (IPHC), Mr. B asserted the "freedom to operate" defense to argue that his design was outside the scope of protection of Mr. A's design registration, and based his argument on the fact that the design he had used was similar to another unprotected design of Mr. A, which was already disclosed prior to the application date of Mr. A's registered design. At the same time, in the invalidation action, Mr. B asserted that Mr. A's design registration was invalid for lack of novelty over Mr. A's previously-disclosed design. 

In response, in the invalidation action, Mr. A successfully argued that the registered design had been filed within the 12-month grace period after the date the earlier design had been disclosed, while presenting the necessary supporting evidence, and thus was entitled to claim an exception to loss of novelty over the earlier-disclosed design. Mr. A then argued in the scope confirmation trial that the "freedom to operate" defense should not apply since Mr. A had validly claimed an exception to loss of novelty over the prior-disclosed design (which was the basis for the "freedom to operate" defense). 

The IPHC, in a decision that appeared fundamentally at odds with the intended purpose of the law, rejected Mr. A's argument, holding that it would be unfair to bar Mr. B from using the freedom to operate defense simply because Mr. A had validly claimed an exception to loss of novelty, since Mr. B had reasonably trusted that the earlier version of the registered design had already been disclosed to the public. The IPHC added that third parties reasonably relying on such prior disclosures should be protected against possible infringement actions. 

However, the Supreme Court reversed and remanded the IPHC's decision. The Supreme Court noted that the Design Protection Act sets forth certain time and procedural conditions in order for an exception to loss of novelty claim to be allowed (i.e., the requirement that the application must be filed within 12 months of the disclosure and accompanied by the relevant supporting documents, at particular stages). The Supreme Court further noted that third parties were additionally protected because the Act provides for a non-exclusive license for prior users who use a disclosed design similar to a registered design without knowing if the registrant of the design has claimed an exception to loss of novelty. The Supreme Court issued another decision in the scope confirmation case on the same day, based on the same reasoning.

These Supreme Court decisions confirm that relying on a freedom to operate defense based on a registrant's prior unprotected design will not be possible, if the asserted design successfully claims an exception to loss of novelty over the prior published design. It is expected that these precedents will also apply to patent cases. It would thus be advisable to first check whether a registered design or patent potentially lacking novelty over a prior public design is eligible for an exception to such loss of novelty before raising the freedom to operate defense.