[비즈한국] Companies sometimes make decisions that are difficult to explain based solely on money. Understanding the laws and systems hidden within those decisions can provide deeper insight into the inner workings. ‘Useful Business Tips (Al-Sseul-Bi-Beop)’ introduces clues to help understand business trends.
As with all legal disputes, the most important aspects of a civil lawsuit are the outcome—whether the claim is upheld—and the scope of that award. From the perspective of the parties involved, especially the plaintiff, what matters is whether they won the case and how much they can receive; the content of the ruling (logical construction) and its legal value are secondary concerns.
This also applies to the lawyer representing the case. In general, legal fees are calculated based on the amount awarded from the claim. Even if a fierce legal battle enriches the substance of a ruling, if the claim is dismissed, everything becomes meaningless.
Looking at past regulations and court practices, one could not guarantee full compensation for damages through civil litigation. This was particularly severe in fields requiring a degree of expertise, such as intellectual property and fair trade.
Under South Korean law, the scope of compensation is limited to the actual damages sustained by the victim. In principle, punitive damages are not recognized. The reasoning is that allowing compensation exceeding actual damages would incite frivolous litigation and greed, leading to social conflict and chaos.
In particular, civil law countries like South Korea tend to resolve disputes or conflicts through government policy or administrative agency actions. Furthermore, it is believed that there is no real benefit to introducing punitive damages because direct state sanctions through administrative measures are considered more efficient than indirect coercion through massive damage awards.
This perspective has been the majority view in South Korea for decades and, being treated as common sense for those who have studied law, was difficult to refute. However, having represented victims in damage lawsuits and administrative petitions for over 15 years, I have deeply realized that this theory is woefully inadequate for protecting victims.
While there are rare cases where a victim receives relief through administrative actions via reports, applications, or petitions, these truly are "rare." Whether an agency initiates an investigation or issues a disposition is entirely at their discretion and cannot be predicted.
Generally, if a case involves even a hint of a private dispute, administrative agencies try to avoid it, often urging the parties to file a civil lawsuit instead. One is likely to face responses such as, "You shouldn't bring this here," or "Do you think we are here to solve your personal problems?" This trend is expected to worsen. The fact that property crimes like fraud, embezzlement, and breach of trust have lower indictment rates than other cases illustrates this.
The notion that compensation should be limited to actual damages sounds plausible in theory, but it can effectively serve as a logic that aids the perpetrator. First, it is practically impossible for a victim to prove every single damage sustained with objective evidence. Therefore, the amount claimed in a lawsuit is almost always less than the actual damage incurred.
Second, in the litigation process, the perpetrator can evade responsibility by arguing that there was "no infringement," "lack of evidence," "the victim is at fault for the occurrence or expansion of the damage," or that "the damage amount should be reduced in terms of fairness or the possibility of double recovery."
As a result, in the field of intellectual property, it is often considered a "wise" strategy to simply use someone else’s work, deny everything, and then minimize the damage amount through effective legal defense.
The frequency of such cases led the Korean Intellectual Property Office to introduce clauses into the Patent Act and the Unfair Competition Prevention Act allowing for damages of up to five times the actual loss. The KIPO explained the background and necessity for these clauses as follows:
○ According to research by the KIPO, in patent infringement lawsuits from 2016 to 2020, plaintiffs claimed an average of 628.29 million KRW, but the median amount awarded was only around 100 million KRW. This is very low compared to the median patent infringement award of 6.47 billion KRW in the United States (1997–2016); even accounting for the difference in economic scale (as of 2018), this is only one-seventh of the U.S. figure.
○ Consequently, the perception that "copying technology is more profitable" than developing it and holding patents or trade secrets has become widespread. For victimized companies, even if they win a lawsuit, the damages are insufficient, leading to a vicious cycle where many give up on litigation.
In cases of patent infringement or unfair competition, expertise is required, making legal fees higher than in other types of cases, often reaching tens of millions of KRW.
However, according to the KIPO's findings, an average award of only 100 million KRW in patent infringement suits is a shocking result. Ultimately, this means that even if you win a patent infringement suit, the amount awarded is barely enough to cover legal fees and other litigation costs, leaving nothing left.
Given this situation, it is smarter for companies to copy others' technology rather than develop it themselves, and in industrial settings, sales are prioritized over technology. In conclusion, to protect legitimate rights through legal action in Korea, the amount of damages must be made realistic. The first step toward this is to break the dogma of the "actual damage compensation principle."
Reflecting this trend, a triple damages clause was introduced in the Fair Trade Act, and even quintuple damages clauses were introduced in the Patent Act and the Unfair Competition Prevention Act.
Some criticize the triple or quintuple damage clauses, arguing they are inconsistent with court practices and will only cause practical confusion. However, in civil law countries like South Korea, which prioritize statutory law and deny the status of judicial precedent as formal law, it is inevitable to revise laws to introduce such clauses to change existing practices. Since we can now easily find cases in lower court rulings that have applied these clauses to award double damages, it is clear that change has already begun.
I hope that there will be more legislative revisions and court rulings that accept these changes in the area of damage calculation, so that I no longer have to hear complaints from clients such as "our law is not really a law" or "it's a system that helps thieves."