Korean Manufacturing/Sub-Contractor Agreement Payment Terms Matter: Don’t fall for the “Service” Trap

We handle numerous cases of the less than scrupulous in Korea taking advantage of the more than trusting from abroad.   The, typical, situation occurs when a Korean company (Buyer or General Contractor) agrees to purchase a product or services from a non-Korean company (Manufacturer or Sub-Contractor). Often, the Korean company agrees to pay a percentage upfront with future payments based on progress milestones.  Often these “progress milestone” are not clearly defined and even if they are Korean companies are notorious for asking for work beyond the scope of the agreement.  Because of the structure of these agreements the Korean company has significant leverage over the Manufacturer/Sub. The leverage comes from the fact that most of the risk is on the non-Korean company.  The down payment is, typically, only enough to cover basic costs and the progress payment, only, is paid upon completion of the milestone, thus, the manufacturer is fronting

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Protecting Products from Parallel Imports into Korea: Trademark/IP in Korea?

A trademark, in brief, under Korean Law is defined as a method of expression used to distinguish one’s goods from those of others.  The concept is simple, however, the law on trademarks in Korea and abroad is far from simple. The use of another person of a company’s trademark (need to register trademarks in Korea – see posts below) is a violation of the rights of the holder of the trademark entitling the holder to an injunction and, potentially, damages.  An issue arises when a Parallel Importer utilizes the trademark to sell goods in Korea of a trademark held by a Sole/Exclusive Importer.  In the typical case the Exclusive Importer is not the holder of the trademark, but has a license to use the trademark.  For example, lets say a company is the Parallel Importer of footwear branded My Left Foot and the Sole/Exclusive Importer of My Left Foot Footwear

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Retail Business in Korea by Tom Coyner

The following is an article written by Tom Coyner in 2007 that still has relevancy in today’s evolving retail market.  Interesting read on an issue that hasn’t changed much since 2007.  It’s amazing what a decade can bring in a rapidly evolving economy such as Korea. In my recent article I discussed how traditional stores have seen their markets nibbled away by first department store and later convenience stores. As important as these developments may be, Korean consumers are now being offered new alternatives Consider it was only a bit more than a decade ago, 1994, that Costco entered a joint venture with Shinsegae Department Store to create Korea’s first major discount store in Seoul, Price Club Korea. Until the Asian financial crisis three years later, the two partners learned from each other. Shinsegae became familiar with warehouse-like discount super stores and Costco learned about Korean retailing. The two companies

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The Power of Samsung in Korea: Ways to Protect your Business from the Powers to Be in Korea

Bloomberg Business Week published earlier this year a great article on the power of Samsung in the Korean market. Many foreign and domestic businesses in Korea have run afoul of Big Blue and have been crushed because of local Korean realities.   The more savvy of companies, dealing with Samsung and like companies in Korea,  have used some creative business strategies and contract clauses that has helped to minimize damages caused by relationships with Samsung and the like that go bad.   The article, below, does not address these business strategies or contract clauses, but a follow-up post on this blog will brief the reader on ways to deal with these Korean realities.   Please take a look at the article from Bloomberg Business Week at:Samsung’s War at Home by Cam Simpson. _____ [email protected] (c) Sean Hayes – SJ IPG. All Rights reserved.  Do not duplicate any content on this

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Suing the Korean Government in Court Abroad: The Ashley Madison Saga Begins

Avid Life Media is suing the Korean Government and the Korea Communications Standards Commission for blocking its Ashley Madison website in Korea in a Canadian Federal Court.  If it intends to enforce the judgment in Korea – Good Luck. Avid Life Media runs the Ashley Madison dating site.  The site motto is “Life is Short. Have an Affair.” Seemingly, the Korean Government blocked the site, since the site is believed to facilitate adultery. Avid Life Media is arguing that the case may be heard in a Canadian court, since the the shutting down of the website, in Korea, will decrease the likelihood of the site being used by Korean-Canadian and Asian-Canadians because of the global nature of people’s lives. Additionally, the plaintiff notes that like sites, owned by Koreans, have not been blocked, thus, the Korean government is engaging in “anti-competitive” practices. The plaintiff is claiming an unspecified amount of

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IPG’s Labor & Employment Law Practice: Proactive, Efficient & Unconflicted

Introduction to the Korean Labor & Employment Law Practice GroupOne our largest practices is our Labor & Employment Law Practice in Korea.  We handle matters, mainly, for foreign companies and foreign executes working for Korean conglomerates.  We are, chosen, over the ubiquitous Korean law firms, often, because of our proactive and unconflicted practice of law.  We are, intentionally, different from the crowd. For example: We have, recently, worked on a post M & A matter caused by a lack of proactive representation  related to the potentiality of assuming the liabilities for severance payments of dispatched workers.  Sad case – led to the termination of the manager in charge of the merger. Obvious matter-  Dispatched workers pose a risk relating to severance and employment security.  Proper M & A structure is required or this risk passes with the sale of the Company; and    We, also, worked on a criminal matter

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Unfair/Wrongful Dismissal of Foreign Executives under Term Contract with Korean Chaebols

Expat executives in Korea are typically hired by Korean conglomerates based on two or three year contracts. These employment contracts often have three to six-month at-will termination clauses. In many cases, these contracts are in violation of the Korean Labor Standards Act. Many foreign executives, recently, have been pushed out of these Korean conglomerates with nothing more than a few months salary and a bitter taste in their mouth. These actions are giving Korea a bad image amongst potential foreign employees and foreign employees are too often letting the conglomerates get away with these actions because of ignorance of Korean law. I was told by an employee-side executive recruiter that he always advises clients to choose China over Korea, since he believes that, in Korea, you have a far greater chance of not completing your contract. We are normally on the business-side of litigation for foreign companies, but the increase in these actions

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Korean Distribution Agreements: So you Want to Work with a Korean Distributor

We have noted, on a number of occasions, that the drafting of a Korea-centric distribution agreement and a good deal of due diligence of the anticipated distributor/agent is necessary for avoiding the issues that will require our litigation services.  Some of the articles on Due Diligence matters may be found below: Doing Business in Asia: Due Diligence, Agreements, Attorneys and Street Smarts Listen to My Mother: JVs in Korea (Translated from Korean) Debt Collection Cases in Korea on the Rise: Due Diligence Brother I have been informed by one of my more frugal of clients that his company would appreciate a basic rundown of a decent distribution agreement (I know you will be drafting this on your own – don’t) – so here we go. The basic clauses we include in most of our Korean Distribution Agreements are as follows: Exclusivity:  Exclusive/Non-exclusive Territory & Products Term of Agreement Renewal/Termination Pricing &

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Hiring/Terminating an Employee/Contractor in Korea: Employment Law in Korea

One of the largest areas of Korean law that we consult on is labor & employment law.  Because of, inter alia, the lack of the conception in Korea of an “at-will” worker – many non-Korean employers get their feet into hot water when structuring agent, consultant, employment and even distribution agreements with Korean individuals.  Some of these arrangements – lead to us needing to defend employers in court.  An expense – that would have, typically, not been necessary. The reality is that the most important aspect of ensuring that you will not have a large employment liability is to: Adequately vet the anticipated hire.  This does not, simply, mean having a call and meeting the person. A Korean “old hat” is, normally, necessary in flagging issues that, often, do not seem to be issues by those not, deeply, familiar with Korean employees and Korean realities; Don’t trust “salary tables.”  In

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Weekly Korean Legal News From International Law Firm – IPG Legal for the Week of July 7, 2014

Weekly Korean Legal News From International Law Firm – IPG Legal For the Week of July 7, 2014Korean Legal News Reported by the Media on the Week of July 7, 2014 Science Ministry to Introduce Laws for Better Mobile Service Plans Validity of Financial Holding Firms in Question Bank of Korea Hints at Rate Cut Pantech Sinking into Deeper Liquidity Crisis Samsung Chief Marks 2 Months in Hospital Most Recent Posts from the Korean Law Blog Is Samsung Doomed? No Innovation Price Trap Is Korea’s “Copy Culture” the Largest Threat to the U.S.? On Fox Business Korean Immigration Law’s 20% Rule Challenged Material Breach of Contracts Under Korean Law: Primary Obligations vs. Secondary Obligations Samsung’s Shareholdings Explained by Wall Street Journal ___ Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked

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Weekly Korean Legal News From International Law Firm – IPG Legal for the Week of June 30, 2014

Weekly Korean Legal News From International Law Firm – IPG Legal for the Week of June 30, 2014Korean Legal News Reported by the Media on the Week of June 30, 2014 FSS Chief Pledges to Back Foreign Firms Cho Steering Hanjin Shipping Out of Liquidity Crunch Park, Xi Boost Security, Business Ties Korea, China to Seal FTA by Year’s End Won Goes from Strength to Strength Most Recent Posts from the Korean Law Blog Is Samsung Doomed? No Innovation Price Trap Is Korea’s “Copy Culture” the Largest Threat to the U.S.? On Fox Business Korean Immigration Law’s 20% Rule Challenged Material Breach of Contracts Under Korean Law: Primary Obligations vs. Secondary Obligations Samsung’s Shareholdings Explained by Wall Street Journal ___ Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the

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Weekly Korean Legal News From International Law Firm – IPG Legal for the Week of June 23, 2014

Weekly Korean Legal News From International Law Firm – IPG Legal for the Week of June 23, 2014Korean Legal News Reported by the Media on the Week of June 23, 2014 Samsung, LG at War over Android Wearables Hyundai Motor to Be Fined for Overstated Fuel Economy Korea Recognized for Combating Money Laundering Asiana Accepts Responsibility for Crash Penalties Likely for Woori Bank Most Recent Posts from the Korean Law Blog Is Korea’s “Copy Culture” the Largest Threat to the U.S.? On Fox Business Korean Immigration Law’s 20% Rule Challenged Material Breach of Contracts Under Korean Law: Primary Obligation vs. Secondary Obligations Samsung’s Shareholdings Explained by Wall Street Journal Finding a Distributor Agent to Sell/Market Your Products in the South Korean Market ___ Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have

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Material Breach of Contracts Under Korean Law: Primary Obligations vs. Secondary Obligations

In most Western nations a “material” breach of a contract leads to the non-breaching party not having to perform its obligations under the contract, while allowing the non-breaching party to immediately sue for all damages (or performance). The Restatement (Second) of Contracts 241 notes that the following criteria can be used to determine whether a specific action/inaction constitutes a material breach: “In determining whether a failure to render or to offer performance is material, the following circumstances are significant: (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to

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Required Traits of a Great Criminal Lawyer in Korea: Hiring a Defense Lawyer in South Korea

There are few great criminal lawyers working in Korea, because of the nature of the Korean criminal justice system and other realities. In Korea, in all cases, where you are accused of a crime and you fear that you may be sentenced to time in a Korean jail, may be deported from Korea or the Korean conviction may harm your future – hire, quickly, an experienced and proactive attorney in Korea with experience in Korean criminal law prior to any interrogations by the Korean police or prosecution. As I mentioned in a post entitled Criminal Defense Lawyers in Korea: Who to Hire – Who Not to Hire: “Sadly, few lawyers, in Korea, are useful for criminal matters, since few lawyers are proactive when it comes to matters concerning the Korean government, experienced in criminal matters for foreigners or willing to upset the status quo (aggressively engage the prosecutor)” Here are

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Ordinary Wages and the Principle of Good Faith in Korea: How long should the principle be applied to Korean CBA?

We wrote a post on this blog a few years back entitled: Ordinary Wages Under Korean Law Clarified by Supreme Court: Regular, Uniform & Flat Defined.  Our post noted, in part, that: ” . . .the Supreme Court, in a case that I will call the Regular Interval Bonus Case, has delivered  a couple of more clear examples, than in the past, of cases that will be considered Ordinary Wages.   In the case, the employer was providing a “regular bonus” every two months. The Court in the Regular Interval Bonus Case opined, in part, that: Any collective bargaining agreement (labor-management agreement or like agreement) that deems a certain type of payment as not an Ordinary Wage is void and, thus, unenforceable.  An exception is available for certain specific companies that have implemented this practice in particular limited situations based on the vague principle of “good faith and trust.”  I will

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“Ordinary Wages” Under Korean Labor Law Clarified by the Supreme Court: “Regular, Uniform & Flat” Definition

The definition of “ordinary wage” has been clarified by the Korean Supreme Court in two decisions handed down on December 18, 2013.  The cases will have a significant impact on Korean Labor & Employment Law and will, likely, lead to additional litigation. The calculation for an Ordinary Wage is utilized to calculate statutory entitlements, thus, has an impact on the aggregate amount of contributions necessary to be paid to an employee.  The issue is one of the most significant issues, this year, for domestic and foreign employers. For example, under Article 56 of the Korean Labor Standards Act, an employer must pay 50% of the “ordinary wage” plus the ordinary wage for overtime, night and weekend work performed by the employee.  For many companies, this calculation could increase costs to a point that will make profitable companies head, immediately, to the red. The basic test has been that an Ordinary

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USPTO & Korean Intellectual Property Office’s New Pilot Program on Classifications of Patents: Korean IP Law Updates

The Korean Intellectual Property Office (KIPO) and the United States Patent and Trademark Office (USPTO) officially announced a Pilot Program in which KIPO will classify patent documents with the Cooperative Patent Classification (CPC).  We congratulate KIPO for this bold and progressive move.    The system is managed by the European Patent Office (EPO) and the USPTO.   The system created over 250,000 classification based on the International Patent Classification system.  The benefit of the new system is that it allows a search worldwide based on these standard classifications.  For those doing prior art searches (yes – I am forced to do this on occasion) – harmonization of classification systems is warmly welcomed.  For an understanding of the CPC classification system please take a look at the CPC’s execellent website at:  Cooperative Patent Classification.  ______ Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team and

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Investor-State Disputes/Arbitration in Korea: ABA Dispute Resolution Magazine

The American Bar Association Dispute Resolution Magazine has an interesting article on Investor-State Disputes that is relevant to Korea.  The article appears in the Fall 2013 edition of the magazine. Some of the “top” law firms in Korea have been notoriously conflicted – thus leading to choices made in agreements that are less than favorable to clients.  This has led, in part, to South Korea being perceived as not a foreign-friendly destination for direct investment.  Additionally, the courts, recently, invalidated an arbitration award against the Korean government – thus frightening more investors from the Korean shores.  Hopefully, Korea has learned from these mistakes.  Korea is a developed market with a vibrant local economy.  Protective measures are no longer needed.  Enforcement of the next arbitration award against the Korean government can be a way to enhance the international reputation of the Korean courts and, thus, increase investor confidence.    The article

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Do you Sell Buggy Whips? Succeeding in a Competitive Korean Market

In many ways, the 19th century continued until the outbreak of World War I. The 20th century ended with the fall of Lehman Brothers.  In confusing times such as these, it is natural for people to draw parallels as a way to understand current events surrounding us. They hope to gain some insight on an uncertain future. Here are some examples: A recent issue of BusinessWeek suggested that America of 2009 may learn from Japan of the 1990s. In Korea, journalists, businesspeople and even some economists refer to the 1997-98 Asian financial crisis as a case study from which they may forecast a future. But America is not Japan. In so many cultural and political ways, such comparisons defy making accurate projections. And the “IMF Crisis” was a regional event. It was relatively isolated from the global economy, compared to the worldwide crisis we face today. Today, several public figures

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Can Koreans Perceive Foreigners as Part of the Tribe? by Senior Advisor Tom Coyner

Living abroad offers interesting and frustrating challenges. Having lived half my life in East Asia, I have long accepted that the trade-off in having an above-average existence comes with above-average potential irritations. That is, if one really gives a damn about what is happening, living in Asia can drive the well-intentioned expatriate up the wall. On the other hand, if one rationalizes what is happening in the immediate community is none of the foreigners’ business, life can be much simpler and more pleasant. A recent case in point came in the guise of an e-mail from an American friend who has lived in Korea for more than 40 years. Having lived here more than two-thirds of his life and being bilingual in Korean, he often seems more Korean than Western. But even before he arrived as a Peace Corps volunteer, he had developed a passion for older architecture. In time,

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