Underlying Procedure for the Grant of a Compulsory License:

The proposed legislation provides for the applicant to seek the granting of a compulsory license through the established patent court system. The court of first instance is the Intellectual Property Tribunal of the Korea Intellectual Property Office. An appeal of the decision of the Intellectual Property Tribunal rendered by a trial board consisting of three trial examiners may be lodged with the Patent Court (High court) and then the Supreme Court of Korea.

Applicant and Pharmaceutical Product:

Anyone who intends to export pharmaceutical products to an Importing Country (as defined below) may request for the granting of a compulsory license. The term "Importing Country" shall mean (A) an LDC designated by the UN; (B) a non-LDC WTO member; or (C) a non WTO member.

The same definition for the term "pharmaceutical products" adopted by WTO General Counsel's decision is adopted.

The right to seek a compulsory license described above applies to all products within the scope of the term "pharmaceutical products" without exception.

Contents of Application and Documents to be Submitted by the Applicant:

The applicant shall set out in the application form: (A) the name and quantity of the pharmaceutical product; (B) list of the Importing Countries; (C) the name of the patentee and the patent number; and (D) compensation to be paid to the patentee. The Presiding Trial Examiner can request the patentee to submit additional information if there are any further patents or patent applications related to the product not initially specified by the applicant.

The applicant has to submit documents showing: (A) that the Importing Country has insufficient or no capacity for the production of the pharmaceutical product in case the Importing Country is not an LDC; (B-1) that the Importing Country has submitted a notification to the Council for TRIPS under Paragraph 2(a) of the Decision of General Council of 30 August 2003; (B-2) that the Importing Country submitted a notification to the Minister of Foreign Affair in the prescribed form; (C) the specific packaging or labeling of the product; (D) the address of the website at which the contents of the compulsory license will be posted; and (E) that the applicant had, at least thirty days before filing the application, sought from the patentee a license to manufacture and sell the pharmaceutical product for export to the Importing Country and that such efforts had not been successful. The applicant can supplement the documents set forth in above (A) to (E) even after the application has been filed. The requirement of negotiating with the patentee set forth in (E) above is deemed to have been met if the Importing Country has notified that it will permit the use of the concerned patent (i) due to national emergency or other circumstances of extreme urgency, (ii) for public non-commercial use, or (iii) to remedy a practice determined after judicial or administrative process to be anti-competitive.

Trial Decision:

A decision will be rendered within thirty (30) days after the applicant has submitted all of the required documents.

The decision shall set out: (A) the name and quantity of the pharmaceutical product; (B) the list of the Importing Countries; (C) the patent number; (D) the consideration to be paid to the patentee and the method of payment; (E) specific packaging or labeling of the product; and (F) a the address of the website at which the contents of the compulsory license will be posted.

Compensation:

The compensation to be paid by the licensee to the patentee is determined by the following formula: (sales quantity) x (price per unit) x (contribution rate) x (basic rate) where sales quantity refers to the aggregate quantity of the pharmaceutical product exported each year to the Importing Country, price per unit is the average price of the pharmaceutical product in the Importing Country calculated each year, contribution rate is the ratio of the patent used in the manufacture of the product, and basic rate is 4%. The basic rate may be adjusted within plus or minus 2% in consideration of the innovative nature of the patent and economic value in the Importing Country. When the compensation cannot be determined by the formula, the Trial Board can determine the appropriate compensation to be paid based on its consideration of the economic value of the patent, prices of the Importing Country and the international humanitarian interest. However, the compensation cannot exceed 6% of net price of the product in the Importing Country.

Even if a patentee does not agree to the compensation, the patentee cannot appeal the grant of a compulsory license based on such compensation.

Obligations of the Licensee and Cancellation of the Compulsory License:

The licensee shall: (A) not export the product in excess of the quantity set forth in the trial decision; (B) not export the product to any countries other than as set forth in the trial decision; (C) not use different packaging and labeling of the product set forth in the trial decision; (D) post the information set forth in the trial decision on the web site set forth in the trial decision; and (E) not ship the product when a compulsory license, if required in the Importing Country, was not granted.

The Commissioner may cancel the compulsory license upon request from the patentee or /ex officio/in case that: (1) the licensee fails to fulfill in good faith any of the obligations set out above (A) to (E); (2) the Importing Country notifies that the circumstances which led to the compulsory license cease to exist; and (3) any other circumstances which led to the compulsory license cease to exist.

Coming into Effect of the Compulsory License:

The grant of a compulsory license becomes effective only after the Commissioner has recorded the contents of the trial decision on the Patent Register.

The licensee may from time to time request the Commissioner to make changes in the Patent Register as to the quantity, the packaging or labeling of the product when such a change occurs after the grant of the compulsory license.