Whether a manufacturer or importer of medical appliances constitutes “when a manufacturer or importer of medical appliances violates Article 12(3) of the former Medical Devices Act” (affirmative in principle)

In light of the contents and purport of Articles 14(5) and 32(1)4-2 of the former Medical Devices Act (wholly amended by Act No. 10564, Apr. 7, 201; hereinafter the same) and Articles 3(1) and 33(1) and 33(2) of the former Medical Service Act (amended by Act No. 10564, Apr. 7, 201); etc., a medical institution is defined only as “the place where a medical person provides medical services.” As such, in principle, it is difficult to deem that the medical institution is naturally a subject of rights and obligations. Since the person operating a medical institution is a founder of a medical institution, the degree of business-related interest also belongs to the founder of a medical institution, taking into account the fact that the manufacturer or importer of a medical device provided money, goods, labor, entertainment, and other economic benefits (hereinafter “economic benefits”) to a manufacturer or importer, barring special circumstances, even if the manufacturer or importer actually did not belong to the medical institution.

Articles 12(3) (see current Article 13(3)), 14(5) (see current Article 15(6)), and 32(1)4-2 (see current Article 36(1)10) of the former Medical Devices Act (wholly amended by Act No. 10564, Apr. 7, 201); Articles 3(1), 33(1), and 33(2) of the former Medical Service Act (Amended by Act No. 10564, Apr. 7, 201);

Press Co., Ltd. (Law Firm Chungcheong, Attorneys Park Jong-ho et al., Counsel for the defendant-appellant)

The Minister of Food and Drug Safety

Seoul High Court Decision 2013Nu22811 decided April 15, 2015

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Regarding ground of appeal No. 1

A. Article 12(3) of the former Medical Devices Act (wholly amended by Act No. 10564, Apr. 7, 2011; hereinafter the same) provides that “A manufacturer shall not provide money, goods, benefits, labor, entertainment, and other economic benefits (hereinafter “economic benefits, etc.”) to a medical person, founder of a medical institution (including the representative, director, or any other employee of a corporation), or an employee of a medical institution for the purpose of facilitating sales, such as inducing the adoption and use of medical devices.” However, the same shall not apply to cases where the act, such as providing samples, supporting academic conferences, supporting clinical trials, supporting clinical trials, holding product briefing sessions, and conducting post-market surveys, which are economic benefits, etc. within the scope prescribed by Ordinance of the Ministry of Health and Welfare.” As a result, attached Table 15-2 [Attachment 3-2] of the former Enforcement Rule of the Medical Devices Act (amended by Ordinance of the Ministry of Health and Welfare No. 85, Nov. 25, 2011).

B. According to the reasoning of the first instance judgment partially admitted by the lower court, the lower court acknowledged the facts as indicated in its reasoning, and determined that the instant equipment is not a product to be provided as a whole with kidscin or the instant consumable, but a substitute product that can be purchased by medical institutions, etc. as necessary, and that the Plaintiff’s provision of the instant equipment during the process of concluding the instant supply contract constitutes “the case where the Plaintiff provided economic benefits to medical institutions, etc. to promote the sale of medical appliances” prohibited by the main sentence of

C. Examining the above provisions and relevant legal principles and records, the above determination by the court below is just, and contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the interpretation and application of “economic benefits, etc.” under the main text of Article 12(3) of the former Medical Devices Act

2. Regarding ground of appeal No. 2

A. Article 32(1)4-2 of the former Medical Devices Act provides that if a manufacturer or importer of medical devices provides economic benefits, etc. in violation of Article 12(3) (including cases applied mutatis mutandis under Article 14(5)), the Commissioner of the Korea Food and Drug Administration may order the manufacturer or importer to cancel permission, close the place of business, prohibit the manufacture, import, and sale of items, or suspend all or part of his/her duties within the period prescribed by Ordinance of the Ministry of Health and Welfare. Furthermore, Article 14(5) of the former Medical Devices Act prohibits a manufacturer of medical devices from providing economic benefits, etc. to medical personnel, the founder of a medical institution, or the person who established a medical institution, for the purpose of facilitating sales, such as inducing the use of medical devices, applies mutatis mutandis to the importer of medical devices.

Meanwhile, Article 3(1) of the former Medical Service Act (amended by Act No. 10564, Apr. 7, 2011; hereinafter the same) defines a medical institution as “a place where a medical person provides medical services and assistance in child delivery (hereinafter “medical services”) for the public or many specific persons.” Article 33(1) of the former Medical Service Act provides that “a medical person shall not provide medical services unless he/she establishes a medical institution under this Act.” Article 33(2) provides that “A medical person shall not provide medical services without establishing a medical institution.” Article 33(1) of the former Medical Service Act provides that “a person who is capable of establishing a medical institution shall not establish a medical institution unless he/she falls under any of the following subparagraphs: (i) a doctor, dentist, herb doctor, or midwife (Article 1); (ii) the State or a local government (Article 2); and (iii) a corporation established for the purpose of medical services.

B. In light of the contents and purport of the aforementioned relevant provisions, since a medical institution under the Medical Service Act is defined only as “the place where a medical person provides medical services,” in principle, it is difficult to deem that the medical institution itself is subject to the rights and obligations as a matter of course. ② Since the person operating a medical institution and operating it is a founder of a medical institution, the profit related to the business may also be deemed to belong to the founder of the medical institution. Even if a manufacturer or importer of a medical device provided economic benefits, etc. to the medical institution, but it is not clear to whom such benefit actually belongs, the economic benefit, etc. may be deemed to be attributed to the founder of the medical institution that operates the medical institution, barring any special circumstance. Accordingly, even in such a case, the manufacturer or importer of a medical device shall be deemed to fall under “the case where a manufacturer

C. According to the reasoning of the first instance judgment partially accepted by the lower court, the lower court determined that the instant disposition was lawful on the ground that the Plaintiff’s installation of the instant equipment to each of the relevant medical institutions free of charge violates Article 12(3) of the former Medical Devices Act, upon entering into a contract for the supply of each medical device to 28 medical institutions from December 1, 2010 to August 30, 201.

D. In light of the aforementioned legal principles and records, such determination by the court below is just, and contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the interpretation and application of Article 12(3) of the former Medical Devices Act.

The Supreme Court precedents cited in the grounds of appeal are inappropriate to be invoked in this case as they differ from this case.

3. As to the third ground for appeal

A. Article 23(1) of the Administrative Procedures Act provides that, when an administrative agency takes a disposition, the administrative agency shall present the grounds and reasons therefor to the parties. This purport is to exclude the arbitrary decision of the administrative agency and to enable the parties to properly cope with the administrative remedy procedure. Therefore, in full view of the contents stated in the written disposition, relevant statutes, and the overall process up to the relevant disposition, etc., where it can be sufficiently known that the parties to the disposition were made for any reason, and where it is deemed that there was no particular hindrance to the party’s objection to moving into the administrative remedy procedure, the disposition cannot be deemed unlawful due to such failure to specify the grounds and reasons for the disposition (see Supreme Court Decision 2011Du18571, Nov. 14, 2013).

B. After compiling the adopted evidence, the lower court determined that the instant disposition was not erroneous in the process of violating Article 23(1) of the Administrative Procedures Act, on the grounds that: (a) it was sufficiently known whether the Plaintiff was subject to an investigation and on-site inspection by an investigative agency prior to the instant disposition; and (b) based on the following: (c) it was sufficiently known that the instant disposition was conducted for any reason and on-the-spot by the Defendant’s prior notice and hearing, on the grounds that: (a) the relevant statute, which serves as the basis for the administrative disposition, was clearly presented in the instant disposition; (b) the Plaintiff stated “from December 1, 2010 to August 30, 201, 28 that “the Plaintiff provided 28 medical institutions with economic benefits, etc. for hospital usage, such as intrusion and computer, for the purpose of facilitating the sale of medical devices.”

C. Examining the above provisions, legal principles, and records, the above determination by the court below is just, and contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the ground of disposition and presentation of reasons under Article 23(1) of the Administrative Procedures Act

4. Conclusion

The appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Yong-deok (Presiding Justice)