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Practice Notes

KIPO publishes examination guidelines for virtual goods

Unsurprisingly given the fast-growing awareness of the metaverse and its implications for brand owners, the Korean IP office (KIPO) has seen a sharp hike in the number of trademark applications covering virtual goods, increasing from just 6 in 2020, to 17 in 2021, and 717 filed between January and May 2022. Reacting to this trend, KIPO has issued new examination guidelines for trademark applications covering virtual goods, effective from July 14, 2022, to prevent applicant’s confusion and to increase consistency of examination. Goods descriptions Virtual goods may now be designated under Class 09 in the simple form “virtual + goods name”, for example “virtual clothing”, “virtual shoes” etc.  This means that it is no longer necessary to rely on long-winded descriptions such as “computer programs containing virtual clothing (virtual goods)” or “downloadable image files (virtual clothing)” which were previously acceptable. Regardless, it is still necessary to specify the type of virtual goods, since an ambiguous description such as “virtual goods” would be unacceptable on account of it being overly broad. Relationship between virtual goods Previously, all virtual goods were considered to be similar regardless of their type. In theory, this meant that “virtual shoes” would have formally conflicted with diverse goods such as “virtual automobiles” etc. This naturally had the potential to lead to disputes between brand owners operating in wholly different fields.  Under the new guidelines, virtual goods will be sub-classified and compared based on their type, just like their physical counterparts. Thus, just as two applications for similar marks respectively covering “clothing” and “footwear” in Class 25 would not be considered conflicting under Korean examination practice, the same would be true for a pair of applications covering “virtual clothing” and “virtual footwear”. However, there would be a conflict between applications respectively covering “virtual pants” and “virtual clothing”, which are formally similar goods. Relationship between physical and virtual goods The new guidelines specify that physical and virtual goods will by default not be considered conflicting for the purposes of examination. By way of example, a new application covering “virtual clothing” in Class 09 would not be blocked by a senior mark covering “clothing” in Class 25. However, if an application covering virtual goods is filed for a mark which is similar to an established well-known/famous mark, the examination regarding physical and virtual goods would also consider whether there is a likelihood of consumer confusion between the later-filed application and the well-known/famous mark, etc. Recommendations While some may have been on the fence before, now that KIPO has clarified its position on the similarity issue regarding physical and virtual goods, it is now important for brand owners to file in Class 09 if they wish to ensure they have protection for the virtual representation of their physical goods. With Korea being a first-to-file jurisdiction, it is recommended that such filing be done as soon as possible. (As discussed above, the new application must specify all of the virtual goods of interest individually, and it would not be sufficient to simply designate “virtual goods”.) It would also be advisable to ensure that Class 09 is included in any trademark watching services set up for marks of importance or interest, especially given the rapid increase in filing activity for virtual goods.   Written by Jonathan MASTERS and Alex Hyon CHO

2022-07-20
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Practice Notes

Easier restoration of IP rights

When patent, utility model, trademark and/or design rights (collectively “IP rights”) are invalidated or extinguished following a rights holder’s inability to meet a statutory deadline, in certain circumstances it is possible to “restore” the IP right to its pre-invalidation or pre-extinguishment state and continue prosecution. Comparing with other systems around the world, Korean IP laws have traditionally applied strict standards for the restoration of IP rights. However, recent revisions have relaxed these requirements, shifting the acceptable standard from “unavoidable reasons” to “justifiable reasons”. These changes came into effect from April 20, 2022. The previous “unavoidable reasons” were applicable only in very limited situations such as natural disasters or wars, while “justifiable reasons” are applicable in emergency situations where the applicant cannot undertake the necessary procedures, for example due to hospitalization for Covid-19. The detailed requirements for the restoration of IP rights are as follows: Substantive Requirements: There must be “justifiable reasons” for failing to comply with the relevant deadline in spite of all due care demanded by the circumstances having been taken. The key requirement, therefore, is to prove that “due care” was taken. The obligation to exercise due care must be considered in light of the situation as it stood before the missed deadline expired. “All due care” means all reasonable care, i.e., that which a reasonably competent patentee, applicant, or representative would employ in the relevant circumstances. Procedural Requirements: Under current IP laws, actions to restore IP rights must be filed within two months from the date on which the justifiable reasons for non-compliance with the original deadline cease to exist, and at the latest within one year of the original deadline. In order to achieve the restoration of IP rights, a petition for restoration of IP rights must be filed within the aforementioned periods together with a statement and evidence showing the “justifiable reasons”. The petition will be examined by the KIPO division handling the case in question. While it is certainly a positive development that the Korean IP office (KIPO) is being more lenient in its approach to IP rights restoration, with more varied causes not attributable to the rights holder being accepted as the justification for a missed deadline, the specific standards for the required statement and evidence have not been clearly stipulated and so there still remains some uncertainty about the practical implications. However, we expect that these standards will become established based on precedent in the weeks and months to come.     Written by Jonathan MASTERS

2022-05-27
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Practice Notes

Designs troubled by trademarks

To achieve registration a design must satisfy several prerequisite requirements, such as novelty and creativity. Novelty signifies that the design, before application, must not have been included in publications or catalogues, publicized through sales or exhibition, or exposed in any other manner such that somebody could identify it. Further, creativeness signifies that a person with ordinary skill in the art could not easily create a given design based on pre-existing internationally or domestically known designs, well-known shapes, patterns, or colors, or any combination thereof. Interplay between designs and trademarks However, even if the aforementioned requirements are satisfied, designs which are liable to create confusion over articles connected with another person’s business cannot be registered and shall be invalidated if granted. Typical examples include designs which use another person’s well-known trademarks, service marks, collective marks, or business emblems (including 3D trademarks). Here, a question arises as to whether a likelihood of confusion requires that there be similarity between the design article and the designated goods of the trademark. Likelihood of confusion Regarding the above question, the court recently answered that similarity between the design article and the designated goods of the trademark is not required in finding a likelihood of confusion. (Patent High Court, 2020heo6255, November 18, 2021) The registered design in question is shown as below and was for a “handbag accessory”. Fig. 1 Fig. 2 Fig. 3    (original 3D file)         (front view)      (Side view) This case examines whether or not the plaintiff’s registered design possesses the possibility of confusion with the defendant’s products related to the trademarks as below, and if so, whether the plaintiff’s registered design should be invalidated. Pre-existing Trademark 1  Pre-existing Trademark 2             (Classes 6,9,14,18,20,24)                  (Classes 14,25,26) Well-known or remarkably famous trademarks are protected, regardless of whether they are registered under the Trademark Act, by restricting the registration of any identical or similar marks. An application for the registration of a similar mark filed by a person other than the owner of such a well-known/famous trademark will be rejected; and, if registration is erroneously granted, the mark will be subject to invalidation. Registration of a similar mark may also be rejected even if the goods of the trademark application are not identical or similar to those of the well-known/famous trademark due to the possibility of misleading the consumers about the origin of the goods as well as anti-competitive practices. Given the global brand recognition of Chanel, whether or not the defendant’s pre-existing trademarks met the legal standards for being ‘famous’ was not in question. Rather, the key issue was with respect to whether or not the plaintiff’s registered design was likely to cause confusion over articles connected with the defendant’s business. The court ruled that there indeed was a possibility of confusion. The following outlines the court’s reasoning: The registered design is comprised of two overlapping circular rings similar to the English letter “O”, and is closed overall, while the pre-existing trademarks consist of two “C”s overlapping in different directions, with both sides open. The registered design shows five thin “O” shaped rings that are connected to form a single ring, while the pre-existing trademark is in the shape of a thick, black English letter “C”. The design differs from the trademark in that the two disk rings are combined in a ring shape to form a three-dimensional effect, while the trademark is flat and two-dimensional. A key similarity between the registered design in question and the pre-existing trademarks involves an intersection and overlapping of two characters featuring the same thickness while both converge at the same angle. The area that intersects and combines symmetrically is the dominant aesthetic feature of the trademarks and designs as well. Despite the above-mentioned differences therebetween, they are too minor to offset the overwhelming similarity in their dominant aesthetic features. Therefore, overall, the two are similar enough to reasonably conclude that it may create confusion over articles connected with the trademark owner’s business. It is important to note that plaintiff’s argument that “the designated products on which the design is to be applied differ in purpose and function from the defendant’s products, and are therefore unlikely to cause confusion”, was rejected by the court. According to the court, it is because as long as there is a possibility of confusion between the registered design and the articles connected with another person’s business, the products of the registered design and the products of the pre-existing trademark are not required to be the same or similar for the purposes of invalidating the registered design. However, there were two important additional factors that the court considered in reaching its decision. First, the product of the plaintiff, in this case a handbag, was comprised of zippers, straps, and materials that were used in the same or similar fashion to those of the defendants’ products. Second, the plaintiff’s design was separately applied for and registered as a trademark for the same design in class 18, which pertains to leather and leather imitation products, which includes handbags. Notes Well-known trademarks are legally protected under both the Trademark Act and the Design Protection Act. According to the Trademark Act, any trademark likely to cause confusion with the goods or business of another person that is remarkably recognized by consumers is ineligible for trademark registration. Similarly, the Design Protection Act states that the application of a design likely to cause confusion with an article associated with another person’s business may be rejected if it is found to be to identical or similar to a pre-existing trademark. Here, as long as there is a possibility of confusion over articles connected with another person’s business, the products of the design and the goods of the trademark are not required to be the same or similar for the purposes of rejecting a design application or invalidating a registered design. When considering filing a design application, it is important to do a similarity search not only for prior designs but also pre-existing trademarks which are well known or famous in the market.   Written by Ben Yuu (Managing Partner)

2022-04-20
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Practice Notes

Updates on Korean trademark law change during COVID-19 (in effect from August 2022)

As a new year has dawned in the midst of the pandemic, the National Assembly, Korea’s legislative branch, gave encouraging gifts to trademark owners by approving amendments to the Trademark Act. The amendments introduce features such as a partial rejection system, a re-examination system, and an expansion of the ways in which trademark holders can prove “use” of their registered trademarks. The revisions were promulgated in early February. The partial rejection and re-examination systems will take effect from February 4, 2023 (one year after promulgation), while the expanded scope of trademark use will take effect from August 4, 2022 (six months after promulgation). What is changing? (Partial Rejection System) Under the current system, where one or more designated goods/services under a trademark application have reasons to be refused, the entire application is doomed to the same fate. It’s an all or nothing game. The only way to save the application without an appeal process is to file an amendment to remove the problematic goods/services (i.e. giving them up entirely through deletion, or splitting off into a divisional application), inevitably at the expense of time and dollars. However, the amended Trademark Act will allow partial rejections of applications. Specifically, examiners may refuse some of the designated goods/services while granting registration of the application for the remaining specification. In cases where the applicant is content to forfeit the refused goods/services, no further action is required on their part to have the application registered for the remaining non-problematic goods/services. This is comparable to practices in other jurisdictions like the US, China, and EUIPO. Also, in line with the partial rejection system, applicants will be able to file an appeal with the IP Trial and Appeal Board (IPTAB) with respect only to the refused goods/services (as a whole, or in part), as opposed to the entire specification of designated goods/services. For further convenience to the appellant, it will be possible to abandon certain goods/services while the appeal is pending with the IPTAB. (Re-examination system) Currently, once an application is finally rejected, the only recourse is to appeal to the IPTAB, no matter what the grounds of rejection are. This is the case even if the application was rejected for non-substantial reasons that can be cured simply by amending the mark or the designated goods/services. The revised Act introduces a re-examination system, where in such straightforward cases applicants may request re-examination and simultaneously file an amendment to cure the rejection grounds. Re-examination by examiners is faster, more convenient and less costly compared to an appeal. This gives applicants another option to choose upon deciding how to respond to an examiner’s final rejection. (Expanding types of trademark use) A trademark registration confers an exclusive right to the use of the registered trademark. Traditionally, trademark “use” has been premised on possession and transfer of ownership of physical products. By legal definition, the term “use” of a trademark means, inter alia, transferring or delivering goods or packages of goods on which trademarks are displayed. There have been discussions as to whether this definition is optimal or adequate for digital products. The amended Trademark Act addresses this issue by including the provision of trademarked goods via a telecommunications line (i.e. online provision) within the core definition of “use of a trademark”, in addition to exhibiting, importing, or exporting trademarked goods for the same purpose. Common examples of this type of use may include uploading or providing subscription services for trademarked computer programs, transmitting e-books and digital files, and providing apps, e-coupons or emoticons via app stores. What to expect? These changes are expected to aid applicants, especially individuals or small and medium sized enterprises who are often unfamiliar with trademark prosecution, in securing trademark rights while also saving time, money, and effort that previously had to be spent analyzing trademark examiners’ grounds for refusal. In addition, the expansion of the types of online trademark “use” reflects the growing increase in the number of digital transactions in the e-commerce market. The new Act will be welcome news for trademark owners, for example whether they need their own online use to be recognized as legitimate “use” to defend a non-use cancellation action, or when their trademarks have been used online by others without authorization and they wish to pursue a claim of infringement.   Written by Ben Yuu (Managing Partner) & Samuel PARK (Legal Intern)

2022-02-07
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Practice Notes

Revisions to Korean Patent Act in effect from April 2022

Introduction On September 29, 2021, a bill to revise the Korean Patent Act was passed at the National Assembly. The revisions were promulgated on October 19, 2021 and will go into effect from April 20, 2022. The Korean IP office (KIPO) announced that the purposes of the revisions are to help remedy applicant mistakes and expand opportunities to acquire IP rights. The revisions meaningful to foreign applicants include: 1) extending the period for requesting trial or re-examination in response to a final rejection; 2) enabling re-examination to be requested along with an amendment to the claims after allowance; 3) introducing a “split application” so that if an appeal from a final rejection is dismissed by the IP Trial & Appeal Board, the non-rejected subject matter can be split off from the rejected application; and 4) easing of the requirements for re-establishment of patent applications and patent rights on a reasonable basis in order to expand the remedies of patent applicants and patent holders. These will be discussed in turn below. 1. Extension of response period following final rejection In response to a final rejection, an applicant may request re-examination along with an amendment (for further consideration by the KIPO examiner), or instead may directly appeal to the IP Trial & Appeal Board (IPTAB) without making an amendment. Under the current provisions of the Patent Act, following a final rejection the applicant is given thirty days to respond. Within this thirty-day period, the applicant has to determine whether the rejection is reasonable and how to amend the claims. However, this is often not long enough to carry out the required work. The revised Patent Act will extend the response period from 30 days to 3 months. A maximum extension of sixty days will still be available per the current Patent Act. 2. Re-examination after allowance Under the revised Patent Act, it will be possible to request re-examination and amend the allowed claims even after receiving a Notice of Allowance. For example, any errors in the allowed claims may be corrected. Under the current Patent Act, some procedures do exist which enable an applicant or patentee to amend the allowed claims, for example a trial for correction. However, re-examination after allowance is more advantageous compared to other existing procedures in view of time and cost. The allowed scope of amendment in re-examination is limited to narrowing the claims by canceling a claim or adding a limitation to a claim, correcting a clerical error, or clarifying an ambiguous description. 3. Split applications Under the current Patent Act, for first final rejections, the easiest way to secure the unrejected or allowable claims is to request re-examination while canceling the rejected claims. If an applicant still wishes to pursue the rejected claims, then an applicant may file a divisional application with the canceled claims. For second final rejections, however, the applicant has to proceed with an appeal. If the appeal succeeds, it is possible to retain the subject matter in a single patent, which may be advantageous in terms of administration and management. However, if the appeal fails, the application is rejected as a whole. At this stage, it is not possible to file a divisional application, and there are no procedures to secure the unrejected claims. The revised Patent Act introduces a ‘split application’. A split application is a unique application that can be filed only when an appeal against a final rejection is dismissed. The subject matter that is not rejected in the final rejection can be claimed in a split application. Split applications may be filed within thirty days of receiving the trial decision. 4. Easing of requirements for re-establishment of rights The Patent Act provides for re-establishment of rights that have been invalidated, or deemed withdrawn or abandoned, due to a failure to observe a time limit set forth by law. These provisions are applied when the time limit was unable to be observed due to a cause “not attributable” to an applicant or patentee. For example, a breakdown of communication resulting from a natural disaster may be a cause deemed not attributable to the applicant. In this case, the applicant is given an opportunity to take action to re-establish their rights. The re-establishment actions should be taken within two months after the cause of the failure has terminated. However, under the current Patent Act, the requirements of acts deemed “not attributable to an applicant or patentee” are too strict, and have rarely been applied in practice. The revised Patent Act eases the requirement to “a justifiable cause.” For example, assume that an applicant has been hospitalized for a long time due to a serious disease. Under the current law, such hospitalization may be deemed attributable to the applicant, and so it is not possible to apply for re-establishment of rights based on this cause. In the KIPO press release regarding the revised Patent Act, hospitalization was exemplified as a justifiable cause.

2021-12-08
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Practice Notes

Internet links can lead to copyright infringement

Introduction On September 9, 2021 the Korean Supreme Court ruled on a copyright case, acknowledging that the defendant’s act of linking to an uploaded copyright video work from their site, without permission of the copyright holder, is an act of infringement (Case No. 2017do19025). The court previously denied infringement claims in relation to acts of linking to copyright material — what has changed? Facts of the Case The defendant had linked to videos (TV dramas, movies etc.) uploaded by unnamed persons to a video sharing site with overseas servers, knowing that when users clicked on the links, copyright  video works would be transmitted in infringement of the copyright owners’ right of public transmission. The defendant posted links to the copyright video works on the message board of a site operated by the defendant and from which they obtained advertising revenue. When users of the site clicked the links, they were moved to a loading screen, following which videos were transmitted. The Prosecution brought this suit against the defendant for facilitating the infringement of the transmission rights of unnamed persons for the purpose of obtaining profit. Relevant Law Article 18 of the Copyright Act prescribes that an author “shall have the right to transmit his/her work in public”. Here, public transmission means “transmitting works … by making such available to the public by wire or wireless means so that the public may receive them or have access to them”, as defined under Article 2-7 of the same Act. Article 32 of the Criminal Act prescribes that “[t]hose who aid and abet the commission of a crime by another person shall be punished as accessories”. Decision First instance and lower court decisions The earlier decisions found that links merely indicate the location or path to a copyright work, and as internet users can only access the relevant infringing content when they click the link and visit the web page which directly infringes copyright holders’ reproduction and transmission rights, the defendant’s actions did not facilitate the act of infringement itself. Further, as the defendant merely took advantage of the situation where transmission rights were already being infringed by another (unrelated) party, the defendant’s actions were not considered an act of aiding infringement. Supreme Court decision Per existing precedent, the Supreme Court decision stated that the act of providing a link to a copyright work does not per se correspond to “transmission” of the work, but rather a link is merely considered an instruction to request transmission of a work or to prepare such a request, or is simply a pathway linking to a work. However, the Supreme Court held that the defendant was fully aware of the criminal infringing activity, but nonetheless continued to post links to infringing works on their site and allow members of the public to easily access the infringing content, in the interest of obtaining profit. As this facilitated the crime by unnamed persons of providing infringing content for public use, it was judged that the crime of aiding in the infringement of transmission rights could be established. Take-aways Contrary to earlier Supreme Court precedent where the act of linking to a webpage containing infringing material did not constitute aiding in the infringement of transmission rights, the subject decision changes this position and clarifies that providing links can itself constitute an act of aiding the infringement of transmission rights. However, the Supreme Court held that aiding of infringement cannot be established if the person providing a link does not clearly recognize it leads to infringing content. In cases where there are not continuous efforts to post links to infringing content in the interest of profit — where there may not be an obvious relationship between the act of providing links and the criminal infringement activity — or in cases where there are considered to be overall reasonable grounds for posting such links, an act of aiding infringement cannot be established. The legal situation under earlier precedents provided insufficient protection for copyright holders as infringers could get away with posting links to infringing content. While the subject decision does still partially protect the freedom to post links, a threshold has been set for establishing the crime of aiding copyright infringement, thereby strengthening the protection of copyright holders’ rights.   Author Recent Posts Jae-sang LIM   Latest posts by Jae-sang LIM (see all)

2021-11-08
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Practice Notes

Double Jeopardy II – Trial decisions to which double jeopardy applies

Introduction: Prohibition of double jeopardy (ne bis in idem) in Korea In accordance with the prohibition of double jeopardy, in Korea, once a patent trial decision on the merits is rendered and becomes final and conclusive, no person may demand a subsequent trial based on the same facts and evidence with the Intellectual Property Trial & Appeal Board (IPTAB). For more details, you may refer to my earlier article, “Timing of Double Jeopardy Judgement in Patent Trials”. Application of double jeopardy The prohibition of double jeopardy has the following pros and cons. Pros Cons Prevents conflicting trial decisions relating to the same matter. Prevents the burden of a respondent having to respond to the same case more than once. The IPTAB only need hear a case once, thus reducing the administrative burden placed on government institutions. The inherent interests of parties seeking a decision via trial could potentially be infringed. Taking an invalidation action as an example, if there are a number of parties who each have their own interests in seeking the invalidation of the same patent, each should have the freedom to bring an invalidation action, but this may not be possible. The pros described above can be generally understood as pertaining to the preservation of patent stability and promotion of judicial economy. While achieving these aims, the prohibition of double jeopardy applies only to cases where the facts and evidence are identical, so as to not infringe the inherent interests of any party wishing to have their case heard via trial. Such prohibition, however, does not apply to decisions to dismiss trial requests for being unlawful, meaning that other parties can still request a trial on the same grounds, regardless of the original dismissal decision. Recent precedent of the Supreme Court The prohibition of double jeopardy in relation to dismissal decisions was recently contested at the Supreme Court (Case 2021HU100777; 3 June 2021). In the earlier instance Patent Court trial, it was ruled that even if there is a decision to dismiss a trial request for being unlawful, as there is substantive judgement regarding lack of inventiveness when a trial is dismissed after judging the identity of evidence, the prohibition of double jeopardy should still be applied. However, faithful to the provisions stipulated in the Patent Act, the Supreme Court held that the prohibition of double jeopardy shall not apply to dismissal decisions, as such judgements could impact third parties’ rights to request a trial. As a result, it may be concluded that the prohibition of double jeopardy does not apply to any dismissal decisions, regardless of whether substantive judgement was carried out in reaching the decision. Written by Young-min KIM (Partner)

2021-08-25
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Practice Notes

Are free downloadable apps considered to be “goods” under trademark law?

Korean trademark law provides that if a registered trademark is not used properly in Korea for a three-year period following its registration, any third party may request cancellation of the mark. To avoid a trademark being cancelled due to non-use, there is no other way but to actually use the registered trademark in Korea. However, even in case the trademark is actually used in some way, this does not necessarily mean that the mark is considered as being used for the designated goods covered by the trademark registration. What are the “goods” here? This issue was recently considered by the Korean Patent Court (Case 2020Heo2901, November 26, 2020). Background The owner of the trademark this case pertains to provides an app-based matchmaking service. The trademark “ditto” was registered covering the Class 09 goods ‘downloadable computer software’. The app with the “ditto” trademark was launched in both the Apple Store and Google Play Store, available to anybody as a free download. The app is an online platform configured to allow users to create a profile based on their personal information (nickname, age, location, occupation, etc.) and an uploaded picture, with users able to view each other’s profiles within the app to express interest and exchange information. Many services are available free-of-charge, but viewing other users’ profiles or sending messages to other users is available only via in-app purchases. IPTAB Trial A trial to revoke the trademark registration was requested by a third party claiming that the mark had not been used in Korea on “the designated goods” for at least three years without justifiable grounds. What is the app then, if not a kind of goods? In this first instance trial, it was alleged that the app does not satisfy the requirements of trademark use because there are no independent transactions with exchange value in and of themselves (in other words, there is no transaction in the form of a product being sold to users in return for payment), and rather, the app is simply a product provided in the running of a matchmaking service. According to theory established by the Korean Supreme Court, the term “goods”, when in the context of a trademark used with a product, refers to an independent object of commerce with an exchange value that is capable of circulation in the commercial market. Goods which function as an advertising medium, which are distributed free-of-charge for the purposes of product advertising or sales promotion, and which are unlikely to be circulated in the commercial market, are not considered “goods” fulfilling the use requirements of a trademark. This line of argument was accepted by the IP Trial and Appeal Board (IPTAB), who rendered a decision to cancel the trademark registration. Appeal Court Decision The trademark rights holder appealed the IPTAB decision to the Patent Court, which reversed the decision. In doing so, it was noted that while the app can be downloaded for free from the Apple Store and Google Play Store, the plaintiff obtains profits from consumers’ in-app purchases paid for while using the app. Accordingly, it was judged that the app is not merely incidental to the matchmaking service business, but is in fact an independent object of commerce with an exchange value and thus considered as “goods” for the purposes of trademark use. Take Aways It is well-established theory that goods in the context of trademark use are independent objects of commerce with exchange values. The definition does not cover goods functioning merely as an advertising medium typically distributed free-of-charge. However, even if free apps appear to be freebies offered without conditions, they may be considered to have an exchange value especially when they include a way for users to pay fees associated with the app, or if users are required to view advertisements — from which the trademark owner profits — at some point while using the app. In such case, the app is likely to be considered as commercial “goods”. As such, the Patent Court was not concerned simply with the fact that the app was free to download, but also considered the method of usage, ways in which transactions take place, as well as general commercial conditions etc., and further there was analysis of whether the trademark rights holder obtains profit from app-related fees paid by users.   Written by Ben YUU

2021-08-13
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Practice Notes

What is an ‘original patent’? Fair Trade Commission issues order to correct unfair advertisement

Introduction As the term ‘original patent’ lacks any specific legal meaning, it is among the potentially misleading terms misused in the marketplace. However, the Fair Trade Commission (hereafter ‘FTC’) have recently ruled that an ad claiming ownership of an ‘original patent’ constitutes an unfair indication or advertisement, in doing so also specifying the requirements for claiming an ‘original patent’. Relevant Law The Korean Fair Labeling and Advertisement Act (hereafter ‘the Act’) prohibits any form of labeling or advertising that is likely to deceive or mislead consumers. Specifically, Article 3-1-1 of the Act stipulates that acts of false or exaggerated labeling/advertising are considered unfair, and Article 3-1 of the Enforcement Decree relating to the Act defines false/exaggerated advertisements as those which differ from reality or inflate facts. Facts of the Case Party A holds a registered patent relating to a film-type leak point sensor(*) utilizing a specific printing technique, with the scope of their rights limited to said technique. Despite the existence of other domestic and foreign patents relating to film-type leak point sensors prior to the registration of Party A’s patent, Party A advertised on their website that they have the ‘original patent’ for film-type leak point sensors. * Leak point sensors detect the leakage of various liquids (water, oil, chemicals etc.) and identify the location of the leak. They are used to prevent harm to human life or damage to property that could occur due to the leakage of hazardous chemicals in industrial facilities, etc. Decision In their decision (Case 2018Seoso1572), the FTC stated that Party A’s actions constituted an act of exaggerated advertising which could mislead consumers and hinder fair trade. The grounds of the decision are summarized below: (1) Exaggeration The FTC recognized the advertisement as being exaggerated based on: The term ‘original patent’ would normally refer to the core patent which forms the basis of high added-value creation in a specific field. In Party A’s patent, the specific printing technique was recognized as having an inventive step over an existing film-type leak point sensor invention to which it was compared. However, other elements could be easily derived from the existing invention. Party A has not provided its technology to competitors, who manufacture and sell general film-type leak point sensors not utilizing the specific printing technique of Party A’s patent. (2) Consumer confusion There is a risk that consumers viewing the advertisement would be misled into believing that Party A has the patent for all film-type leak point sensor products. (3) Hindering of fair trade Whether or not a purveyor has the original patent in the leak point sensor field would be an important factor when considering a purchase, so there is a risk of consumers’ rational decision-making and the fair trade order being hindered. Take-aways In this case, Party A suggesting that they held the original patent for all kinds of film-type leak point sensors, despite the scope of their patent only extending to products utilizing a specific printing process, was considered exaggerated advertising. In more general terms, it may be said that it is an act of unfair labeling/advertising to suggest that an ‘original patent’ is held for technology beyond the limited scope of that covered by a registered patent. Following this decision, we may expect the FTC to now respond more actively when presented with advertisements relating to an ‘original patent’. In the case we have discussed, only suspension and prohibition orders were imposed on Party A, but the severest penalties allowed under law extend to up to two years’ imprisonment or a fine of up to 150 million won (approx. $130,000 USD). Companies should thus take care when using the term ‘original patent’ in advertising copy.   Written by Jae-sang LIM , Ben YUU

2021-07-28
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Practice Notes

Improved damages calculation for trademark, design and unfair competition infringement cases

Mirroring a recent amendment to the Patent Act which came into effect from December 10, 2020 (details here), the Trademark Act, Design Protection Act and Unfair Competition Prevention and Trade Secret Protection Act have also been amended to include an improved method for calculating damages in trademark, design and unfair competition infringement cases. The new amendments took effect from June 23, 2021. Comparison of calculation methods There are a number of methods by which damages may be calculated, as follows: Profits lost by the IP rights holder due to the infringement Profits obtained by the infringer from the infringement “Reasonably expected” royalties Statutory damages When calculating damages under the first method above, which may be preferred particularly if the infringing items undercut the price of the genuine goods, the upper ceiling used to be restricted by the IP owner’s own sales capacity. Using a simple example, if the IP owner had the potential to sell a total of 1,000 items in the relevant timeframe that the infringement took place, but the IP owner actually sold only 100 items, the maximum number of additional items they could have theoretically sold if it not been for the infringement is 900, and even if the infringer sold more items than this, the final damages calculation would have been based on this ‘900’ figure. The new calculation method, however, includes the addition of a reasonable license fee per infringing item sold in excess of the IP owner’s sales capacity. A comparison of the previous and updated calculation methods is shown below: Previous New   Lower among: 1. No. of infringing items disposed by infringer 2. (IP owner’s total sales capacity) – (No. of items actually disposed by IP owner) x     IP owner’s per-item profit   Lower among: 1. No. of infringing items disposed by infringer 2. (IP owner’s total sales capacity) – (No. of items actually disposed by IP owner) x     IP owner’s per-item profit   +       (‘Excess’ no. of items disposed by infringer) x (Reasonable license fee for the infringed IP right) Reason for the amendments and expected effects The previous calculation method was particularly disadvantageous when the IP rights of small companies without access to large-scale production facilities were infringed. In such cases, despite having IP rights in their technology, idea or brand, small-or medium-sized companies could lose out to infringers with large-scale production capacity as the damages available even if infringement was acknowledged would be severely limited. This situation is addressed in the revised calculation method, and IP owners will now be able to receive compensation commensurate with the scale of the infringement, even if they could not have achieved such sales themselves. It is expected that these changes will reduce the incentive to steal or copy IP and instead encourage a greater uptake in license agreements, ultimately promoting the growth of small- and medium-sized companies. These revisions, when combined with the recently-introduced treble damages system available in infringement suits (details here), mean that the protection available to IP holders against intentional infringement is now stronger than ever in Korea, and claiming damages from infringers should now be a more approachable solution where it might not have been practical or financially advantageous to do so in the past. The one remaining Achilles’ heel in this system is the difficulty in actually proving intentional infringement (also touched on in our earlier article here), and in the press release concerning the subject revisions, a KIPO spokesperson was quoted as saying that they plan to introduce an improved evidence-collection system as soon as possible to address this deficiency. We will of course report further on this topic as soon as there are any updates.     Written by Jonathan MASTERS, Ben YUU 

2021-07-08
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Practice Notes

Design law amendment to cover “projected” image designs

Introduction From October 21, 2021 an amendment to the Korean Design Protection Act allowing for protection of functional “projected” image designs such as holograms, augmented reality, projected displays etc. will come into effect. With the advancement of technology, projected displays are becoming more and more commonplace and other leading IP jurisdictions are already expanding the scope of protection available for such new developments in order to accommodate this trend. Existing legislation To date, image designs (including graphical user interfaces, icons etc.) have only been protectable in Korea when displayed within a defined screen/panel of a physical article, and designs which are realized in an undefined space outside of a physical design article or projected onto any other external surface have fallen outside the scope of available protection. The current Korean IP Office (KIPO) Design Examination Guidelines provide the following two examples of non-protectable designs, in both of which the projected display is located outside the physical design article: Design Examination Guidelines> Specifics of amendment The definition of the term ‘design’ in Article 2(1) of the Design Protection Act will be expanded to include projected images. A new sub-clause (Article 2(2)-2) will be added to define such images as figures, symbols etc. expressed using digital technology or electronic means. This will however be limited to designs that are used to operate a device or which otherwise exhibit a function. The definition of the term ‘working of a design’ (Article 2(7)), which previously covered only physical design articles, will be expanded to include the production, use, or online transmission of projected image designs (i.e. as data), as well as the assignment, rental, export or import of physical media containing a projected image design. A recent KIPO press release contained the following examples of designs which will potentially be protectable in future:         Virtual keyboards Smart bracelets Projected piano keyboard Smart car headlights Comment Following the revision, which will apply to design applications filed on or after October 21, 2021, a new category of design protection will be available in Korea. It is expected that there will be widespread interest in this development from applicants in various technology fields.   Written by  Jonathan MASTERS  

2021-06-03
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Practice Notes

[Asia IP Interview] SEP and the Cities

This post was first published by ASIA IP, the link is down below: [ASIA IP] SEP and the Cities : https://www.asiaiplaw.com/section/in-depth/sep-and-the-cities In this ever-changing world, licensors and licensees must keep up with the global nature of the standard essential patent market, or their corporate decisions would be negatively affected. Johnny Chan reports.   Standard essential patent (SEP) holders are obliged to license under fair, reasonable and non-discriminatory (FRAND) terms. A royalty amount should therefore be fair and reasonable, but who draws the line? That line can be determined based on two factors: royalty base and rate. “Royalty base may be the sales amount of either the end-product or the smallest saleable unit that incorporates the SEP. The appropriate choice is licensee-dependable. The end-product value approach would be appropriate in case the licensees are manufacturers of intermediate units or smallest saleable units,” says Ben Yuu, managing partner at NAM & NAM in Seoul. “On the other hand, the SSU value approach would be more appropriate in case the licensees are the manufacturers of the end products.” Rate determination may be based on several approaches, including: ex ante, comparable license agreement, top-down and present value-added. Under ex ante, royalty is determined considering the additional value of the patents versus the value of the next best alternative prior to the standardization. Under comparable license agreement, royalty is determined considering the examples of royalties that were actually applied in other comparable licenses. Under top-down, royalty is determined by assessing the aggregate royalty for all relevant SEPs and then apportioning the aggregate royalty to each SEP. The aggregate royalty is determined based on the net profits of the SSU manufacturer. Under present value-added, royalty is determined considering the increase in the value of the licensed product that is specifically attributable to the SEPs. “Each approach has pros and cons. The choice depends on the parties’ relative positions and the available information,” Yuu says. “Many suggest that an appropriate combination of the approaches is preferable.”   origin: ASIA IP (https://www.asiaiplaw.com/section/in-depth/sep-and-the-cities) “Royalty rates are the most efficiently calculated by using one approach as a reference together with another approach as a cross-check,” he says. “More specifically, the royalty is first determined based on a reference approach and then appropriately adjust the determined royalty based on cross-check approach.” “The comparable license agreement approach might be the best choice as a reference approach,” he adds. “It is the most convenient and fast approach. Once a set of licenses is selected as most closely comparable, a fair and reasonable range of royalty may be figured out, in which also the parties may negotiate royalty within that range. To choose comparable license agreements, some factors are considered such as technological complexities, the portfolio of the SEP, and the licensed products, etc.” “As for a cross-check approach, I’d choose present value-added. Most of all, since this approach is a type of top down, it may be appropriate to avoid the royalty stacking issue,” he explains. “Royalty is a function of the future incremental value generated by implementing the technology covered by SEPs. Royalty should therefore reflect the pure contribution of the SEP to the value of the licensed product. The incremental value in the value chain for such as end products, intermediate products or SSUs are to be summed up without redundancy. The incremental value is generated from the additional customer demand for the licensed products, which includes end product manufacturers, intermediate products and SSUs. The additional customer demand comes from the consumer’s willingness to pay for the standardized products. The incremental value may also be calculated by doing market research on the actual price of the licensed products. Here, the incremental price is a function of the incremental value of the SEP technology, which will be in need of an economic model factoring in demand and competition valuables.”   Trust antitrust Due to FRAND terms, there is no monopoly in SEP licensing. According to Taiwan’s Patent Act, the patentee is entitled to license or enforce its patent, including any legal action against unauthorized use of the patent. Nonetheless, in order to determine or clarify whether it is improper licensing or non-licensing, which may involve antitrust issues, the Fair Trade Commission (the authority in charge of antitrust and unfair competition under the Fair Trade Act) has set Fair Trade Commission Disposal Directions (Guidelines) on Technology Licensing Arrangements to govern the licensing by which the Fair Trade Commission stipulated specific situations as FRAND, says Ruey-Sen Tsai, a partner at Lee and Li in Taipei. “Unless the licensing constitutes unfair competition in violation of the Fair Trade Act or violates any antitrust stipulations, it should be fine for the patentee to license or enforce its patent by taking any legal actions as allowed under the Patent Act.” origin: ASIA IP (https://www.asiaiplaw.com/section/in-depth/sep-and-the-cities) Once the patentee violates the Guidelines, the Fair Trade Commission will determine the antitrust issues and whether to impose punishments on the patentee at its discretion or upon the complaints from any third party, Tsai says. “Besides, once the FTC determines that the patentee has any unfair competition in licensing, the IP office may possibly grant compulsory licensing to the relevant enterprises.”   Patpool Patent pools are not a new concept, but they seem to be enjoying something of a renaissance in areas such as high-efficiency video coding, automotive and the internet of things. A lawyer explains how pools are a sensible approach when licensing SEPs: “Like any other solution that attempts to balance the interests of the parties in a licensing discussion, patent pools have their advantages (and disadvantages), and can be used as a sensible alternative to bilateral licensing discussions. Patent pools can be particularly beneficial for smaller players in a standards ecosystem, where the smaller player may not have the resources in undertaking a lengthy process for deciding royalty rate,” says Pankaj Soni, a partner at Remfry & Sagar in Gurugram. “Pools can also work well in instances where cross-licensing is not an option and therefore, the potential licensee may not have much to gain from a bilateral discussion. Moreover, in cases where the major players in a standards ecosystem are aligned and agree on the framework of a common pool platform, the system can be rewarding because pools potentially reduce transaction costs, offer some sense of transparency about the proposed licensing terms, distribute risks among the players and, should mitigate hold-up and hold-out problems. In many instances, essentiality checks by licensees can be optimized since such checks don’t have to be repeated. Last but not least, even in situations where the licensors are unable to align their business interests to create a single pool, different pools can be created to take advantage of the above points.” “Nevertheless, patent pools are not the panacea for SEP licensing problems and must be looked at in specific context to decide the fruitfulness of engaging in a pool versus entering a direct licensing discussion with the SEP holder,” says Soni.   Caution! As the growth of IoTs leads to a soaring demand in connected devices that read on SEPs across a range of sectors, another expert provides some tips for the implementers in these sectors to reduce their litigation risk. origin: ASIA IP (https://www.asiaiplaw.com/section/in-depth/sep-and-the-cities) As SEPs differ from usual patents, owners of SEP are required to disclose related information and commit to license to implementers and claim royalty under FRAND declaration. “Such declaration is purposed to bind the SEP owners and guide parties to make negotiations and reach license agreements,” says Zunxia Li, a partner at IP March in Beijing. “Therefore, it is general rather than specific, and related details of license are left to further negotiation between parties.” “Because of the generality of such declaration and balance of respective interests of both parties that patent hold-up and hold-out occur frequently, SEP-related litigation increases year by year,” Li says. “In the judicial practice, SEP-related lawsuits mainly focus on dispute for infringement, royalty and abuse of dominant market position, wherein, dispute for infringement is mainly about grant of injunction relief, and dispute for royalty is mainly in determining the rate and the calculation process, these two kinds of dispute are closely related to implementers, and the third kind of dispute is usually initiated as countermeasure by implementers against accusations from SEP owners. In dealing with these, understanding of the legal nature of FRAND and compliance of parties to FRAND often has a crucial impact on the resolution of the disputes.” “From a global perspective, due to differences in civil and contract law systems across countries, judicial practice makes different understanding of the legal nature of FRAND,” she says. “In the US, the courts deem a FRAND declaration establishes a contractual relationship between the SEP owner and the standard setting organization, and implementer as third-party beneficiary of the contract. In the EU, the majority of courts hold that a FRAND declaration is only an invitation to offer to implementer. In China, the courts deem that a FRAND declaration should not be regarded as establishment of a licensing contract relationship between parties, but should be as a criterion to be followed by parties in the license negotiation, and as basis to determine fault of parties in the negotiation.” Due to the differences in understanding the legal nature of FRAND worldwide, specific content of FRAND and degree of fault of parties in the licensing negotiation are usually the key of examination for different jurisdictions, especially the courts of China. “Based on the examination, the responsibility of parties would be determined, especially when determining whether to grant injunctive relief to the SEP owner in the dispute. Specifically, when determining whether injunction is granted, it is important to consider whether parties have obvious fault in violation of the principle of good faith in the license negotiation. If the parties involved have no fault, or the SEP owner has fault but implementer has none, the injunction usually will not be granted, through which the abuse of patent will be avoided. If the SEP owner has no fault but the implementer has, the SEP owner usually is supported and an injunction is granted, through which the ‘hold-out’ of implementer will be avoided. In the case that both parties are at fault, whether the injunction is granted will depend on the overall balance of degree of fault of both parties and interests of both,” she adds. “For example, in Huawei v. Samsung for patent infringement, the Chinese court concluded through trial that Samsung had obvious fault in the licensing negotiation, while Huawei had none, and thereby supported Huawei by granting injunctive relief. From this aspect, it can be conveyed that grant of injunction is closely related to the fault of implementer, and is usually premised on the existence of fault of implementer. As to dispute of royalty, the premise for the court to accept such cases usually requires the SEP owner to prove that it has fully negotiated with the implementer on the license conditions, but failed to reach agreement.” origin: ASIA IP (https://www.asiaiplaw.com/section/in-depth/sep-and-the-cities) In view of corresponding legal provisions and judicial practices worldwide, though, there are some differences in identifying fault of parties in the licensing negotiation, the implementer and SEP owner may be identified as having fault at least in the following circumstances, she says: For the implementer: Refusing to receive the negotiation notice from the SEP owner, or failing to give a clear reply within a reasonable timeframe, or make substantive reply to the patent information (i.e., a list of sample patents and claim chart, etc.) provided by the SEP owner; Failing to actively reply whether to accept or not within a reasonable period after receiving written license conditions from the SEP owner, or failing to propose new license conditions when refusing to accept the license conditions raised by the SEP owner; Obstructing or delaying to undertake the license negotiation without justified reasons; Claiming obviously unreasonable conditions in the process of negotiating and implementing license conditions, resulting in the failure to reach the license; or Refusing to sign a confidentiality agreement without justified reasons, resulting in the inability to continue negotiation. “In countries such as Japan, where the implementer requires the SEP owner to provide corresponding proof of necessity and validity of the patent, and otherwise will refuse the license negotiation, or where the implementer fails to explain the calculation basis of the royalty proposed in the license negotiation, or fails to explain that the counteroffer is based on a FRAND declaration, the implementer may also be deemed faulty,” says Li. For the SEP owner: Failing to inform implementer in writing of infringement, and not specifying the scope; Failing to issue a negotiation notice to implementer, or though a negotiation notice is issued, not specifying the scope of patent involved in accordance with business practice and trading habits though a negotiation notice is issued; After the implementer expresses his intention for license negotiation, then failing to provide the implementer with related information (i.e. patent list and claim chart) according to the business practice and trading habit; or Failing to put forward specific license conditions and calculation basis of royalty to implementer, or the proposed license conditions are obviously unreasonable, resulting in failure to reach agreement. “Based on the above, the implementer is advised to pay attention to the following instructions when licensing SEPs in order to reduce potential litigation risk,” says Li. 1. Once it is determined a license is needed, take the initiative to express the intention of negotiation to the SEP owner;2. After receiving written notice of negotiation from the SEP owner, do not ignore the notice but analyze whether the notice is clear (are the patent list, claim chart and specific conditions provided?), and respond within the specified time. Meanwhile, process the content to determine whether terms are reasonable. If not, propose new ones and if possible, give calculation basis of the proposed royalty;3. In the absence of legitimate reasons, try to avoid delays; and4. Secure evidence relating to the fault of the SEP owner conducted in license negotiation.   Changes There are several facets of SEP licensing that can – and probably should – be reformed. However, the challenge is to balance the competing interests of patent holders and implementers to create a platform that will be largely non-litigious, manage the expectations of the parties and keep consumer interests at the fore. “There is not a one-size-fits-all approach to SEP licensing as each area of technology, business environment, size of player, antitrust implications, etc, create unique requirements (and limitations) which will dictate the kinds of reforms that are needed,” Soni says. “Nonetheless, three broad based themes for reforms could be (i) transparency with respect to the rates and terms of the license; (ii) a predictable framework for establishing essentiality of SEP and; (iii) parameters on what constitutes FRAND.”      

2021-06-02
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