Calculating Patent Infringement Damages under Korean Patent Act Article 128

Article 128 of the Korean Patent Act provides several methods for proving patent-infringement damages. The available methods include the patent holder's lost profits, the infringer's profits, a reasonable royalty, judicial determination when proof is difficult, and enhanced damages for willful infringement. The 2019 and 2024 amendments expanded the role of enhanced damages.

Patent holder's lost profits: Articles 128(2) and 128(3)

Article 128(2) estimates the profits the patent holder would have earned absent the infringement. The basic formula is:

Infringing sales volume × patent holder's profit per unit

Sales volume and profit per unit

• Infringing sales volume: the starting point is the quantity sold by the infringer, subject to the patent holder's production capacity and other statutory limits. Sales data may be obtained through an order for submission of data under Article 132.
• Profit per unit: Korean case law generally uses marginal profit or contribution margin. Variable costs directly associated with production and sale are deducted, while fixed costs that would have been incurred regardless of the infringement generally are not.

Classification of semi-variable costs and allocation of common costs may require accounting evidence or expert appraisal.

Production capacity

The proviso to Article 128(2) limits recovery to the patent holder's remaining production capacity. Evidence may include facilities, personnel, outsourcing arrangements, operating rates, past output, and documented expansion plans.

Non-infringement market factors

Article 128(3) permits deduction of sales the patent holder would not have made for reasons unrelated to infringement. Relevant factors include non-infringing alternatives, market demand, substitutability, price, brand recognition, and marketing capacity. These issues concern causation between the infringement and the claimed loss.

The calculation may be expressed as:

Min{infringing quantity, remaining production capacity} × profit per unit × (1 − market-factor deduction rate)

Infringer's profits: Article 128(4)

Article 128(4) presumes that profits earned from infringement equal the patent holder's damages. The provision reduces the patent holder's evidentiary burden.

Infringer profit is calculated from revenue attributable to the infringing goods less deductible costs associated with their production and sale. Supreme Court Decision 2006Da17609 and related cases generally focus on variable costs. Product-specific revenue, product-specific costs, and a reasonable method for allocating common expenses remain important evidentiary issues.

Article 132 permits an order for submission of relevant accounting data. Under Article 132(6), noncompliance may support treatment of the requesting party's allegations as true if the statutory requirements are met.

Apportionment

The infringer may rebut the presumption by proving that part of the profit resulted from factors other than the patented technology. Relevant evidence may include independent technology, product design, brand value, marketing, non-infringing components, R&D expenditure, and the patented feature's technical and commercial importance.

This method may be useful when the patent holder has limited production capacity or when reliable infringer revenue and cost data are available.

Reasonable royalty: Articles 128(5) and 128(6)

Article 128(5) permits recovery of the amount that could reasonably have been received for use of the patent. This method may apply when lost profits or infringer profits are difficult to prove or yield a lower amount.

Infringing-product revenue or sales volume × reasonable royalty rate or per-unit royalty

Relevant factors include:

• existing licenses for the patent;
• licensing practice for comparable technology;
• the patented technology's technical importance and commercial contribution;
• available non-infringing alternatives and their cost;
• remaining patent term and claim scope;
• exclusivity;
• related or convoyed sales; and
• the parties' positions and expected profits at the hypothetical negotiation date.

Technology valuation, industry-license data, and comparable litigation may support the rate. Article 128(6) permits recovery of proven actual damages exceeding the reasonable-royalty amount, so the reasonable royalty may operate as a minimum measure rather than a cap.

Combined methods and judicial determination: Article 128(7)

Article 128(7) permits the court to determine a reasonable amount after considering the entire evidentiary record when the amount is difficult to prove. Different methods may apply to different portions of the infringing sales.

• Lost profits plus reasonable royalty: lost profits may apply to sales within the patent holder's capacity and a reasonable royalty to sales above that capacity. Supreme Court Decision 2006Da17609 recognizes this type of combined calculation.
• Price erosion: reduced profit caused by price reductions in response to infringing competition may be claimed if causation, amount, and the requirements for special damages are proven.
• Equitable assessment: the court may consider all proven circumstances when setting the final amount within the statutory framework.

Enhanced damages for willful infringement: Articles 128(8) and 128(9)

The enhanced-damages regime introduced in 2019 permits an increase when infringement is willful. The 2024 amendment raised the statutory maximum to five times the basic damages for conduct governed by the amended provision.

Evidence of willfulness

Willfulness requires more than knowledge that a patent exists. Evidence may include infringement notices and responses, internal emails or meeting records, freedom-to-operate work, design-around efforts, continued conduct after notice, and the timing and substance of legal opinions. A documented and reasonable non-infringement or invalidity position may be relevant to the assessment.

Multiplier factors

Article 128(9) lists eight factors:

1. the infringer's superior position;
2. the degree of intent or awareness of the likelihood of harm;
3. the magnitude of the harm;
4. the economic benefit obtained through infringement;
5. the duration and frequency of infringement;
6. criminal sanctions such as fines;
7. the infringer's financial condition; and
8. the infringer's remedial efforts.

The patent holder should plead the factual basis for willfulness and each relevant multiplier factor. The accused infringer should preserve the basis for its validity and non-infringement positions, remedial measures, and financial evidence.

Evidence and pleading plan

The appropriate damages method depends on the available sales, cost, production-capacity, licensing, market, and intent evidence. Pleadings may present alternative calculations while identifying which sales or periods are assigned to each method.

Accounting records, licensing files, market evidence, technical apportionment, document-submission orders, and willfulness evidence should be addressed early because each category affects both recoverability and the final amount.