A Study on the Determination of Domestic Source Royalty income : Focusing on the Supreme Court’s Decision of February 10, 2022., 2019Doo50946

For the past 30 years, the Korean Supreme Court has consistently determined whether royalties for patent rights registered abroad but not registered in Korea qualify as domestic source income based on “the principle of patent territoriality”, which states that a patentee’s right to practice a patent is effective only in the territory of the country in which the patent is registered, and there seems to be little disagreement among academics on the principle of patent territoriality. However, the 『Act on the investigation of unfair international trade practices and remedy against injury to industry』, which was enacted to implement the agreements of the “TRIPs Agreement”, an annex to WTO system established by “Marrakesh Agreement” to resolve trade disputes arising from differences in the level of intellectual property protection between countries, should be applied in preference to 『Patent Act』. This article confirms that the act of manufacturing and exporting goods that infringe the patent rights of the importing country constitutes an “illegal act” under domestic law as a requirement for establishing damages, which leads to the conclusion that damages can be claimed for tort under 『Civil Act』. In addition, the study suggests improvements to the system of claim for reassessment of domestic-source income of foreign corporations in relation to the issues concerning the shifting of the burden of proof and the calculation of proper tax amounts. We hope that this study will provide an opportunity to break away from the principle of patent territoriality and establish a new judgement that reflects the actual execution of royalties for unregistered patent rights in Korea, and will help improve the legislation of the claim of reassessment system.