A damages claim against the equipment purchaser
On 31 January 2019, the Korean Supreme Court dismissed the appeals in case 2017Da289903, upholding the Patent Court’s decision of 10 November 2017 in case 2017Na1001. The patentee had authorised a licensee to manufacture and sell equipment implementing a patented welding method. After the licensee sold the machines, the patentee sought infringement damages from their purchaser.
The dispute concerned the effect of that authorised sale on use of the particular machines. Patent exhaustion does not invalidate a patent or give the purchaser a general right to manufacture new machines. It limits the patentee’s ability to control dealings in, and use of, the specific article placed on the market with the requisite authority.
A method claim does not prevent exhaustion
The Court held that a patent on a method, including a method of making a product, may be exhausted where the patentee or an authorised licensee lawfully transfers in Korea equipment that substantially embodies the patented method. The fact that the claims are drafted as a process rather than an apparatus is not decisive.
This approach protects the circulation of goods and the security of transactions. A patentee can take the value of the patented use into account in the sale price or licence arrangements. The Court did not accept that the choice of claim format should, by itself, permit renewed control over the purchaser’s use after an authorised sale.
When does a machine substantially embody the method?
The assessment is specific to the equipment and the claims. Relevant considerations include whether the machine’s substantial intended use is to practise the patented method, whether its components incorporate the core technical solution, and how much of the complete method and its effects the machine performs or achieves.
A supposed alternative use must be meaningful in economic, commercial and practical terms. Merely theoretical, experimental or temporary uses do not necessarily prevent substantial embodiment. Conversely, buying a general-purpose machine does not automatically establish exhaustion of every method patent that might be practised with it.
The welding machines met the test
In this case, the equipment included welding probes and probe pins with the claimed shapes and inclinations. Its structure implemented the core solution and enabled the full welding process and the associated effects. The seller had express authority from the patentee to manufacture and sell the equipment.
Taken together, those circumstances supported exhaustion in relation to the sold machines. The purchaser’s defence depended on both the legitimacy of the sale and the technical relationship between the equipment and the claimed method; a receipt alone would not answer both questions.
An admission about exclusive use affected the litigation
At the first hearing below, the patentee had admitted that the machines were dedicated exclusively to carrying out the patented method. The Court treated that statement as a binding judicial admission. The patentee later sought to withdraw it, but did not establish the conditions for doing so, including that the admission was untrue and made by mistake.
The Supreme Court upheld that treatment. Descriptions of how a machine can be used are therefore not merely background narrative: they may determine a fact central to an exhaustion defence. Counsel and technical staff should verify such statements against the machine’s actual configuration and operating records before they are made in court.
Preserve evidence of authority and the machine’s function
A purchaser assessing exhaustion should retain the purchase documents and evidence of the seller’s authority, then compare the asserted claims with the equipment’s components, operation and role in the production process. The review should distinguish use of the sold machine from making a new patented product or employing a materially different process.
For licensors and manufacturers, agreements should clearly address manufacturing and sales authority and the scope of royalty arrangements. Contract wording should not be assumed to override exhaustion in every situation. The practical lesson is to analyse the authorised transaction, substantial embodiment and litigation evidence together.
The original figure labels and forms are preserved; the text explains the facts and the court’s reasoning.