Asia News (South Korea) | Case Tracking (Patents)

    The Supreme Court of Korea has ruled that income generated from the use of patents within South Korea is subject to Korean taxes, even if those patents are not registered in the country. This ruling reaffirms the court’s stance that as long as a patent is actually utilized in local industrial activities, it is sufficient to establish tax jurisdiction.

    In a recent hearing of a lawsuit filed by the U.S. patent-holding company Optodot, the court overturned a lower court’s decision that had favored the company.

    Optodot had requested a review of approximately 500 million won (USD 341,000) in taxes levied by the South Korean battery manufacturer Samsung SDI on its patent licensing income.

    Out of 20 licensing agreements signed in 2017, 19 involved patents registered overseas and not filed with South Korean intellectual property authorities. Optodot argued that under the U.S.-Korea Income Tax Treaty, royalties for patents not registered in South Korea do not constitute Korean-source income.

    The lower court adopted this view, ruling that the income originated from the United States, where the patents were registered.

    The Supreme Court of Korea disagreed, asserting that "patents registered overseas but utilized for production and sales activities within South Korea constitute domestic-source income." The court noted that since the U.S.-Korea Income Tax Treaty does not define the concept of "use," it should be interpreted according to South Korean law. In this context, "use" refers to the location where the technology is actually applied.

    The case will be remanded to the Suwon High Court for retrial. The High Court will reconsider Optodot’s objection to the tax authorities' rejection of its tax refund application, in accordance with the Supreme Court’s guidance.

    This ruling continues the stance established in a similar decision in September 2025, when the court broke away from the traditional interpretive framework for overseas-registered patents. In a lawsuit filed by SK Hynix, the court upheld the tax authorities' right to levy income tax on royalties for patents registered only in the U.S. but used in domestic operations.

    Since 1992, the South Korean Supreme Court had consistently maintained that patent-related income should be attributed to the country of patent registration. In its latest ruling, the court pointed out that while patent rights possess territorial characteristics, this does not mean that the use of technology within South Korea is irrelevant to taxation.

    The court further explained that the principle of territoriality only means that when a patent is registered abroad, the use of that technology within South Korea does not constitute patent infringement.

Source:https://ipr.mofcom.gov.cn/article/gjxw/gbhj/yzqt/hg/202601/1994897.html