YOON&YANG

South Korean law firm Yoon & Yang has hired veteran antitrust lawyer Keum Seok Oh as partner and former Korea Fair Trade Commission (KFTC) commissioner Yeong Ho Shin as senior advisor, strengthening its competition law practice.

On September 18, 2025, the Supreme Court of Korea issued a landmark en banc decision, ruling that royalties paid for the use of patented technology within Korea constitute domestic-source income, even if the patent is not registered in Korea. This judgment overturns approximately 30 years of precedent, which had held that royalties paid for the right to use non-domestically registered patents could not be considered domestic-source income.As a result of this ruling, companies paying patent royalties to U.S. corporations must now withhold taxes on payments corresponding to the domestic use regardless of whether the patents are registered in Korea. Furthermore, companies entering into patent license agreements with U.S. entities will need to more clearly define provisions regarding the scope of tax withholding.   1. Background and Issue2. Court's Decision3. Implications  1. Background and Issue Around 2011, a Korean corporation (the "Plaintiff", the withholding agent, acting on behalf of the taxpayer), was sued for patent infringement in the United States by a U.S. corporation. The lawsuit was settled in December 2013, under which the Plaintiff agreed to pay royalties for a worldwide license to the U.S.-registered patent.The Plaintiff withheld and paid KRW 300 million in corporate tax to the Korean tax authority from these royalty payments. However, in June 2015, the Plaintiff filed for a refund of the withheld tax, arguing that royalties for a patent registered abroad but not in Korea do not constitute domestic-source income. In February 2019, the tax authority (the "Defendant") denied this request, leading the Plaintiff to file a lawsuit. The central issue in this case was whether payments for the use of patented technology in Korea should be treated as domestic-source income, even if the patent itself is not registered in the country. 2. Court's Decision A. The Lower Court's Decision The appellate court (Suwon High Court), adhering to previous Supreme Court precedent, relied on the principle of patent territoriality. This principle holds that the use of a non-domestically registered patent cannot be legally recognized in Korea. Consequently, the court ruled that the royalties were not domestic-source income. It concluded that there was no need to determine whether the patented technology was actually used in the domestic manufacturing and sales process; the lack of domestic registration was sufficient to exclude it from taxation. B. The Supreme Court's Decision (Majority Opinion) The Supreme Court en banc reversed and remanded the lower court's decision, holding that "if the technology of a patent not registered in Korea is used for manufacturing, sales, etc., in Korea, the corresponding royalties are domestic-source income." In doing so, it overturned all previous Supreme Court rulings to the contrary. The Supreme Court provided the following reasoning: •While the legal effect of a patent right is limited to the country where it is registered (the principle of territoriality), the patented technology itself—such as manufacturing methods, techniques, and information—can be used anywhere, regardless of national borders. •Article 14(4) of the ROK-U.S. Tax Treaty lists various types of intangible assets, including patents, copyrights, know-how, and knowledge . The Court determined that the term "use" should be interpreted consistently across these assets to mean the use of their content, such as the technology or information, rather than the use of the exclusive right granted by registration. •The principle of territoriality serves as a standard for determining a patent's scope of validity and whether infringement has occurred; it does not restrict where the patented technology can be used under a contract. It is entirely possible for a Korean company to enter into a contract with a foreign patent holder to use a non-domestically registered patented technology in Korea, and such an agreement does not violate the territoriality principle. •Based on this logic, there is no special reason to exclude the application of domestic tax law. Therefore, the provision in the former Corporate Tax Act (Article 93, Item 8, proviso) must be applied. This provision specifies that a patent registered abroad is considered "used in Korea" if it is employed in domestic manufacturing, sales, or other business activities. In conclusion, the Supreme Court shifted the standard for determining domestic-source income from the patent's registration status to whether the underlying technology was factually used in Korea, thereby overturning its long-established precedent.  3. Implications A. Previous Decisions Previously, the Supreme Court strictly applied the principle of patent territoriality. It held that since a patent's exclusive rights are effective only in the country of registration, the "use" of a patent not registered in Korea was conceptually impossible within the country. Accordingly, the Court consistently ruled that royalties paid by domestic companies to U.S. patent holders were not domestic-source income and thus not subject to Korean taxation. B. Significance of the New Decision This en banc decision marks a significant change by distinguishing between the "use of a patent right" and the "use of patented technology." The ruling clarifies that in the realm of tax law, economic substance—specifically, the location where the technology is actually used—should be the standard for determining tax jurisdiction, rather than the legal scope of the right. This decision is expected to lead tax authorities to more actively assess taxes on patent royalties paid to foreign corporations, regardless of domestic registration, as long as the technology is substantively used in business activities in Korea. Domestic companies paying royalties under overseas patent license agreements will now need to carefully review what portion of the patents are actually used domestically to ensure compliance with their withholding tax obligations. While the ruling appears to promote the prevention of national wealth outflow by emphasizing economic substance, it also raises practical issues, such as the burden of proof in demonstrating domestic use and the potential for legal confusion. These issues are likely to be further debated in the remanded case and could have a significant impact on tax policy and the international investment environment. The Tax Group of Yoon & Yang LLC provides premier one-stop total services in the fields of tax advisory and litigation. For a wide range of clients' economic activities, the group offers proactive tax plans and response strategies designed to maximize tax savings and minimize tax risk, delivering services best suited for a rapidly changing environment.

Yoon & Yang has recruited partners Jin Kook Lee and So Yeon Yoon to strengthen its M&A and corporate advisory capabilities.

Yoon & Yang has further strengthened its corporate capabilities with the addition of Myong-Hyon (Brandon) Ryu, a leading expert in cross-border mergers and acquisitions who is admitted in New York, USA, as a Senior Foreign Attorney.

Yoon & Yang LLC has once again been ranked as a Tier 1 firm in South Korea in the Asia IP Rankings published in the May 2025 issue of Asian Legal Business (ALB). This marks the eighth consecutive year that Yoon & Yang maintained its Tier 1 status, reaffirming the firm’s strong and consistent presence in the Korean IP legal market.  Asian Legal Business, owned by Thomson Reuters, the world’s leading source of intellectual information for companies and professionals, annually announces the list of top law firms located in the Asian jurisdictions based on their IP works and client/peer feedback. RANKINGS: ALB Asia IP Rankings 2025

Yoon & Yang LLC has been recognized as a Tier 1 law firm for White-collar crime category in Korea in the Benchmark Litigation Asia-Pacific 2025 edition. Benchmark Litigation focuses exclusively on evaluating law firms in the field of litigation and dispute resolution. In its 2025 edition, the publication released law firm rankings and leading lawyers across 10 practice areas in the Korean legal market, including Commercial and Transactions, Competition/antitrust, international arbitration, and Labor and employment. Furthermore, 35 partners have been named as Litigation Stars and Future Stars. Litigation Star∙ Commercial and transactions: Hoil Yoon, Seung Nam Yoo, Byeong-Cheol Yun, Seung Ryong Yoo∙ Competition/antitrust: Chul Ho Kim, Sang Oh Jeon, Paul S. Rhee∙ Construction: Seung Ku Hong, Kyung In Jung, Sang-Pil Lee∙ Insolvency: Joon Oh Jo∙ Intellectual property: Wonil Kim, Dongju Kwon, Changkwon Kim, Chulgun Lim, Sejung Lee∙ International arbitration: Junsang Lee, Myung-Ahn Kim, Sam Kim∙ Labor and employment: Sang Hoon Park, Tae Hwan Oh, Chan-Keun Park∙ Product liability and recall: Seung Ryong Yoo∙ Tax: Jay Shim∙ White collar crime: Sungkyu Lee, Young Ki Kim, Kyoung-Ho Hong Future Star∙ Commercial and transactions: Sue Yeon Woo∙ Competition/antitrust: Young Min Kang, SB(Suakbuam) Hong∙ Construction: Soo Hyeon Park∙ Intellectual property: Hong Seok Choi∙ Labor and employment: Seong Hong, Daeyeon Kim∙ White collar crime: Gyun Min Kim, Kyu Woong Cho 

Yoon & Yang LLC has been invited to present at the Korea Anti-Corruption Forum organized by Asian Legal Business at JW Marriott Hotel on March 29th. Yoon & Yang’s partner Dong Eon Cha will give a presentation on the Korea’s anti-corruption investigations and the heightened anti-corruption standards under the Improper Solicitation and Graft Act.

Yoon & Yang LLC sponsored 2020 In-House Community eCongress Vietnam and South Korea, hosted by In-House Community.

Yoon & Yang LLC participated in In-House Congress (IHC) Ho Chi Minh City 2019 as a panelist of the Plenary Session and as speakers at the Workshop Session.

Three partners of Yoon & Yang’s Intellectual Property Practice Group have been selected as IP Stars and Notable practitioner in the 2022 edition of IP Stars. IP Stars is a globally renowned annual ranking directory in the field of IP practice published by Managing Intellectual Property (MIP). Wonil Kim was named as both Patent star and Trade mark star in South Korea, and Sejung Lee was named as Trade mark star in South Korea. In addition, Young Woon You was recognized as Notable practitioner in IP Stars 2022.   IP Stars receives submissions from renowned IP law firms around the world, and announces the best IP practice firms and leading lawyers globally by conducting extensive research and peer/client feedback.   Please refer to the following web-link to view the full list of Leading Lawyers recognized by IP Stars 2022.   IP Stars 2022

Clearwater Capital Partners (CCP), a private equity fund based in Singapore, sold its shares in Aerix, a Korean solutions provider for air pollution control and protection equipment, to a Korean private equity fund jointly established by UAMCO and Keystone Private Equity.   Yoon & Yang LLC represented Clearwater Capital Partners with respect to various legal issues on all stages of the transaction including negotiation of terms and conditions of the transaction and review of transaction documents including MOU and SPA. In particular, Yoon & Yang played a significant role by providing advices to the seller regarding not only legal issues and documentation but also  seller’s communication and negotiation with the buyer, a local private equity fund. As a result, the parties successfully closed the deal with Yoon & Yang’s advices that went beyond the scope of typical assistance provided by legal advisors in other transactions.   This transaction is meaningful in that a Singapore-based private equity fund investing in the broader Asia-Pacific region successfully exited its investment in Korea by selling its shares and managerial rights in a Korean company to a local private equity fund.

Yoon & Yang LLC successfully advised Boll & Kirch Filterbau GmbH, an industrial filter manufacturing company in Germany in its acquisition of 75% shares in SKF Marine Korea Ltd., a Korea based manufacturing company from its majority shareholder in Germany, SKF Marine GmbH. In a transaction where both the buyer and the seller are German companies while a target company is located in Korea, Yoon & Yang as a legal counsel for a buyer, provided comprehensive legal advices on every aspect of the transaction such as conducting due diligence on a target company, drafting and reviewing share purchase agreements, assisting deal negotiation and deal closing. Moreover, Yoon & Yang successfully advised follow-on issues such as reporting on foreign investment and changes of foreign investor’s name to the Korean government and the transfer of shareholder name.

Yoon & Yang LLC successfully advised POSCO Plantec, a financially troubled POSCO affiliate, on its turnaround through M&A. POSCO Plantec, a Korean industrial machinery manufacturer, commenced its restructuring program in June 2015 while it was under the supervision of creditor banks including Korea Development Bank. However, after implementing intensive restructuring programs, the company selected United Asset Management Company (UAMCO) as a preferred bidder to purchase the company in late 2019. POSCO Plantec issued new shares to creditors through debt-to-equity conversion and also issued additional new shares to UAMCO in March 2020. POSCO Plantec was able to improve its financial structure through such transactions and finally emerged out of the restructuring program in June 2020. Yoon & Yang advised POSCO Plantec on all aspects of the transactions including the selection of preferred bidder, the paid-in capital increase for third-party allocation by issuing new shares, the debt-to-equity conversion, and the capital reduction without refund. In particular, Yoon & Yang advised POSCO Plantec with respect to bidding process, structure of transactions, contract drafting and negotiation, and closing. Yoon & Yang has a long track record of advising on distressed company M&A transactions. In 2011, the firm successfully advised Woori Financial Group on its acquisition of Samhwa Mutual Savings Bank after Samhwa went bankrupt because of financial troubles.