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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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Practice Notes

Strengthened provisions for keeping designs secret

  When a design application is filed, no details are publicly disclosed unless specifically requested by the applicant. Differing to patent applications, which are published in full after a fixed period of time in order to prevent redundant research and investment, the details of design applications are disclosed via publication in the Design Gazette at the time of registration. In Korea, it is possible to postpone this disclosure even longer by utilizing the “secret design” system. Secret design system In contrast with technical innovations typically protected by patent, designs are relatively easier to imitate and steal from others, and are also subject to fast-moving trends. There will thus be situations when it is desirable to keep a design confidential even after registration, such as when the commercialization of the product has not yet been realized. The secret design system prevents the full content of a design application from being disclosed even after registration, while the fact the design is registered may still be confirmed in the publicly-accessible register alongside other bibliographic details such as applicant/inventor details, application/registration dates, etc. When using this system, the applicant can request to keep the design “secret” for up to three years after the date of registration, and for multiple-design applications can choose to keep all or only some of the embodiments secret. In principle, in the absence of a secret design request, the full content of a design application is published in the Design Gazette upon registration of the design. Until now, where a request is made to keep the design secret the following details have been withheld: Drawings/photographs (including photographs of sample) Essentials of the creation Design description What has changed? Until now, even if a secret design request was made, the title of the product and its Locarno classification were still disclosed. However, it was considered that this system should be improved to allow applicants stronger protection and enable more strategic management when applying for new product designs. To this end, from April 1, 2021, where a request is made to keep the design secret the following details will also be withheld: Product title Locarno classification The below table summarizes exactly what is disclosed and kept confidential under the revised secret design system: Details disclosed upon publication of registered design Details not disclosed Name/address of rights holder Partial or full-examination eligibility * Name/address of creator(s) Application number/date Registration number/date Drawings/photographs Essentials of creation Design description Product title Locarno classification * Designs in Locarno Classes 01, 02, 03, 05, 09, 11 and 19 are subject to “partial examination”. See here for more details. Use of the secret design system Since 2016 there have been more 2,000 secret designs requests per year, reaching 2,729 last year (2020), or roughly 3.8% of all applied-for designs, a number which has more than doubled compared to 2014 data: Year: 2014 2015 2016 2017 2018 2019 2020 No. of secret designs: 1,232 1,775 2,072 2,100 2,113 2,426 2,729 After a design application is filed, the applicant can request that the design be kept secret at any time between the application filing date and the date on which the registration fee is paid. As mentioned above, the period of confidentiality can be up to three years following the registration date, and upon request the applicant can choose to shorten/extend this period as they wish (up to the maximum three years).     Written by Ben YUU  

2021-04-02
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Practice Notes

Trademark infringement theory – innocent or infringing?

If a later-filed application for a trademark (hereafter “junior mark”) which is substantially similar to a prior-registered trademark (hereafter “senior mark”) achieves registration, does use of this junior mark constitute infringement of the trademark rights in the senior mark? The answer to this question is not explicitly provided for under the Korean Trademark Act, and so it is left to the courts to interpret the law. There are a number of existing precedents which address this issue, and until now the understanding has been that this factual situation does not constitute infringement. However, a recent en banc Supreme Court ruling (2018Da253444 | March 18, 2021) has overturned this convention. Trademark registrations and case history In this case, the filing date of the defendant’s junior mark was later than the registration date of the plaintiff’s senior mark. The details of the marks are as below:   Senior mark Junior mark Mark: (Korean text translation: Data Recovery Specialists / DATA FACTORY) Application date: Sep 5, 2014 Aug 10, 2016 Registration date: Dec 18, 2014 Aug 8, 2017 Goods/services: Class 09: Computer software, etc. Class 42: Development of computer programs, etc. Class 09: Computer software for scanning images and documents Class 42: Design and development of computer programs, etc. Before the junior mark was filed, the rights holder of the senior mark had already filed a suit against the defendant on June 13, 2016, claiming damages and seeking an order that they cease use of the “DATA FACTORY” mark, which was also being used by the defendant in other forms such as “”. While this suit was pending, on August 10, 2016 the defendant applied for and eventually obtained registration of the junior mark. The defendant argued that at the very least their usage of the mark after the August 8, 2017 registration date of the junior mark should be considered genuine use of a registered trademark, and so cannot be infringement. (The court viewed the opposing marks as being substantially similar, and the respective goods/services as identical/similar, but as this does not directly relate to the point of this article we will not discuss this aspect of the case.) Earlier precedents The key issue in this case is whether the defendant’s use of the mark after a trademark registration had been secured is considered use of their registered mark, and whether this constitutes infringement of the plaintiff’s senior mark. There have been a number of Supreme Court rulings stating that the rights holder of a later-filed registered trademark does not infringe the rights in another party’s similar earlier-filed registered trademark when using their mark with respect to goods/services similar to the designated goods/services of their registration, at least until their later registration is formally invalidated (98Da54434 | February 23, 1999 etc.). The logic here is that even if there are applicable grounds to invalidate a registered mark, until the registration is formally invalidated via a trial procedure, the rights in the registered mark persist. This was, however, limited to cases where the later registered mark and the mark actually used by the rights holder were substantially identical, and did not include use of a modified mark. The subject en banc decision As previous rulings relied upon different theories and reasoning, this case was heard en banc by the Supreme Court, and is in complete contrast with the earlier precedents. In reaching a decision, the court carefully considered the following factors: Per Article 35(1) of the Korean Trademark Act, when two or more applications for trademark registration of identical/similar marks for identical/similar goods/services are filed on different days, only the applicant with the earlier filing date may obtain registration. Thus, the law clarifies that priority is given to earlier-filed marks, and any trademark which achieves registration in violation of this principle may be subject to invalidation according to Article 117(1)-1 of the Trademark Act. Per Article 92 of the Trademark Act, where the use of a registered trademark by the rights holder conflicts with another party’s earlier-filed patent right, utility model right or design right, or another party’s earlier-created copyright, the trademark rights holder may not use the registered trademark on any designated goods/services which conflict with the other party’s earlier rights unless consent is granted. Just as in trademark law, when there are conflicting patent rights, utility model rights or design rights, the basic principle is that earlier-filed or earlier-created right is given priority. Based on the above, assuming a junior mark is filed and achieves registration after a similar senior mark has already been filed and registered earlier, if the junior mark is then used with respect to goods/services identical/similar to those protected by the senior mark without consent of the senior mark rights holder, the effect of the junior mark is limited. Thus, the court ruled that in this factual situation, infringement of the senior mark is established regardless of whether the junior mark is invalidated via a trial procedure. Following this decision, earlier Supreme Court precedents which allowed the rights holder of a later-filed registered trademark to use their mark with respect to goods/services identical/similar to the designated goods/services of their registration without infringing the rights in another party’s similar earlier-filed registered trademark, at least until their later registration is formally invalidated, no longer apply. Final thoughts After selecting a trademark, we encourage applicants to file a trademark application as soon as possible. In the case discussed in this article, even though the junior mark was applied-for and registered after an infringement suit had commenced, infringement of the senior mark was ultimately still acknowledged. As a first-to-file jurisdiction, simply using a mark first without registration provides little meaningful protection in Korea, and if the filing of an application is delayed and another party’s similar mark is filed and achieves registration in the meantime, it could end up being a major problem. This decision underscores the importance of early filing in Korea and reflects the court’s closer adherence to the basic principle of first-to-file, which the earlier precedents arguably deviated from somewhat.     Written by Ben YUU, Sung-wook KIM

2021-03-25
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Practice Notes

Notable changes affecting Korean trademark practice in early 2021

The Korean Intellectual Property Office (KIPO) has made a number of updates to the Trademark Examination Guidelines, Similar Goods Examination Guidelines, and Trademark Act Enforcement Rules effective from January/February 2021. The most noteworthy changes are summarized below: Similar Goods Examination Guidelines: Class 09 software descriptions [From Jan 1 2021] Until now, KIPO has allowed the designation of broad terms such as “software” and “application software for smart phones” in Class 09. However, given the reality that the purpose or scope of most software is quite limited in practice, allowing such broad coverage has resulted in a crowded register with new applications for software marks often being blocked by senior marks which are actually used for software with an entirely different purpose. For these reasons, and considering industry opinion and examination guidelines in other jurisdictions such as the US, KIPO will now require the specific function of software to be specified in applications filed on or after January 1, 2021. Software descriptions will now be broadly classified either as (i) system software, (ii) game software, or (iii) application software. In determining similarity between different software types, game software will be considered different to system/application software, while the similarity of system and application software will be decided on a case-by-case basis. Software may also be deemed similar to directly related services, though this will only apply when the marks are identical or very similar. One example is that an application for “software for screen golf games” (Class 09) would be deemed similar to an identical or very similar mark covering “operation of screen golf facilities” (Class 41), but not to a mark covering the more general “leisure sport services” (Class 41). Trademark Examination Guidelines: Non-traditional marks [From Jan 1 2021] Reflecting an increase in trademark applications for various kinds of trade dress, the updated Trademark Examination Guidelines contain a number of notable revisions relating to non-traditional trademarks, aimed at improving examination quality: 3D trademarks Formal recognition that solid and dashed/dotted lines can be used to indicate claimed and non-claimed parts of a 3D trademark. Store design trademarks (“interior/exterior of a place at which goods are sold or services are provided”) are now classified as a distinct type of 3D mark, and specific guidelines pertaining to their examination are included for the first time. Incidental parts of a store design which the applicant does not wish to claim rights in (such as windows or other building materials) may be indicated with dashed/dotted lines, so long as consistency in the overall appearance is maintained. Like other 3D marks for product packaging etc., store design marks will be essentially considered as having weak distinctiveness, and so showing evidence of acquired distinctiveness will be required to achieve registration. Non-traditional trademarks, particularly 3D trademarks, will be examined more strictly for functionality in order to avoid granting potentially unlimited trademark rights in elements which should be protected under patent. This will in practice comprise a check of (i) whether a relevant patent or utility model exists, (ii) whether there have been advertisements etc. directed to the functionality of the product, (iii) whether an alternative form exists, and (iv) the ease and economic feasibility of such alternative forms. Position/color trademarks The definition of a position trademark has been expanded from simply “shapes/figures which have acquired distinctiveness when used in a particular position on a product” to now include “colors” when used in a particular position. This will potentially allow for registration of marks where the use of a specific color in a specific location of a product acts as a source-identifier, as per some well-known examples in other jurisdictions such as the Christian Louboutin red-soled shoe (US Reg. No. 3361597) and Prada red tab sneakers (EU TM No. 001027747): US Reg. No. 3361597 EU TM No. 001027747 The description of the specific shade for color trademarks (and color position marks) has also been expanded from just Pantone to now include Hex, RAL, RGB, CMYK, KS A 0062 etc. Trademark Examination Guidelines: Foreign-language trademarks [From Jan 1 2021] For trademarks containing text in a foreign language (i.e. not Korean), such text has until now been treated as a readable word part if represented using the ‘English’ alphabet, Chinese characters, or Japanese hiragana/katakana. Such parts could then be compared with senior marks in terms of pronunciation etc., while text in other languages/scripts was treated as a graphical symbol/device for the purposes of examination. This list has now been clarified to cover text in English language, languages using the Latin alphabet (French, German, Spanish etc.), Chinese (traditional or simplified), Japanese (hiragana/katakana) etc., and a further exception has been added to include text in any other language if the pronunciation/meaning is well-known among consumers. Trademark Act Enforcement Rules: Various [From Feb 1 2021] Among the numerous minor revisions to the Enforcement Rules, the following are likely to be of most interest to foreign applicants: The number of drawings/photographs which must be submitted when applying for a 3D mark has been amended from “2 to 5” to “1 to 5”, allowing for submission of a single drawing/photograph if it allows the mark to be clearly represented. This brings Korea into line with other jurisdictions such as the US, EU and Japan which also allow for a single drawing. (Movement and hologram trademarks will still require 2-5 drawings/photographs, as these marks include a change in form which cannot be shown in a single drawing/photograph.) The time period for submission of files/samples for International Registrations for sound/smell marks designating Korea has been extended from 1 month to 3 months (in consideration of delays attributable to international post). The acceptable methods of indicating a registered trademark have been expanded to include barcodes, QR codes etc. which point to an internet location where the registration number and registration status are presented. Previously acceptable methods were indication of the registration number itself, or provision of a URL where the registration number and registration status are presented. Written by Sung-yeon CHO, Jonathan MASTERS

2021-03-08
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Practice Notes

Korea Patent Court takes issue with ex officio examination of trial request validity

Scenario: Party A files a scope confirmation trial, seeking a determination on whether Party B’s working of an invention (hereafter the “invention subject to confirmation”) falls within the scope of Party A’s patent. However, if the invention subject to confirmation is identical to a later-registered patent belonging to Party B (filed and registered later than Party A’s patent), Party A’s trial request is considered improper, as this could effectively result in the validity of Party B’s later-registered patent being denied without it being subject to an invalidity trial. Whether requests for scope confirmation trials are improper in this manner are examined ex officio by the IP Trial & Appeal Board (IPTAB) regardless of the assertions of the involved parties (i.e. Parties A and B in our example). However, a recent Patent Court decision (Case 2019Heo8932 dated September 25, 2020) has stated that if the IPTAB ex officio dismisses a scope confirmation trial after judging it to be improper for the reasons described above but does not give the involved parties an opportunity to submit an opinion, such IPTAB trial decision itself is in violation of procedure. Patent Court Case 2019Heo8932 In this case, the original respondent (hereafter “Party B” as per our general example above) confirmed that the invention subject to confirmation and their later-registered patent were not the same, and so they did not intend to argue that their opponent (“Party A”)’s trial request was improper. In other words, there was no dispute between the parties on the point that Party B’s invention subject to confirmation and later-registered patent were different. Regardless of this agreement, the IPTAB did not allow Parties A and B an opportunity to submit opinions on the identity of Party B’s invention subject to confirmation and later-registered patent. The Patent Court stated that if such an opportunity had been given, Party A could have amended the invention subject to confirmation or argued that Party B’s later-registered patent was different, and the IPTAB’s rendering of an ex officio decision without affording such an opportunity to the involved parties was a procedural violation. Comment Under Korean practice, the party who files a scope confirmation trial is permitted to amend the invention subject to confirmation, but the identity of the invention must be maintained before and after such amendments[1]. Therefore,  even if Party A had been afforded an opportunity to amend the invention subject to confirmation, after amendment it would still have been identical to Party B’s later-registered patent and the IPTAB would have rendered the same decision, meaning that not giving such opportunity does not make the trial decision improper. However, Party A could still have argued the differences between the invention subject to confirmation and Party B’s later-registered patent if they had been able to submit an opinion. Moreover, as neither party contested the point that the inventions were different, if they knew that the IPTAB intended to deny this point, Parties A and B could have negotiated and agreed to a withdrawal of the trial. Therefore, in addition to the Patent Court’s judgement that the IPTAB’s trial decision was a procedural invalidation, I believe it could also be seen as infringing on the disposition rights of the involved parties. Notes: [1]A Patent Act revision dated January 3, 2017 permits amendment of the invention subject to confirmation to conform to the invention that the opposing party actually works when the opposing party argues that the invention subject to confirmation is different from the invention that the opposing party actually works. However, this does apply to the case discussed herein.     Written by Young-min KIM

2021-01-13
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Practice Notes

KIPO Measures to Prevent Online Counterfeits

Shortcut to… Introduction / Measures / Comment Introduction The Korean Intellectual Property Office (KIPO) recently announced its Measures to Prevent Online Counterfeits. According to a KIPO press release, the number of reports concerning online counterfeits has increased by 204.4% year-on-year (looking at the period of January to August 2019 and 2020) following the increase in online shopping during the COVID-19 pandemic. In response, KIPO has devised the following measures to more effectively combat the rapidly increasing online distribution of counterfeit products while minimizing damage to consumers. Measures Strengthened online crackdowns Offline enforcement personnel are temporarily handling online monitoring. The Special Judicial Police are: directly investigating mass distributors and frequent sellers of counterfeit products; reinforcing investigative manpower; and promoting the advancement of investigation techniques, such as digital forensics. Improved damage relief for consumers In cooperation with trademark holders, the results of a counterfeit product evaluation are shared with consumers to enable unsuspecting purchasers of counterfeit products to receive refunds and request compensation. A damages compensation system has been established, under which online open market platforms compensate for damage resulting from the purchase of counterfeit products first and then claim indemnity from the individual seller. System improvements and increased public-private cooperation It is proposed that trademark law be revised to make sales intermediaries [1]  such as online platforms, responsible for preventing trademark infringement in order to halt the distribution of counterfeit products. Comment Given that the capacity for handling online crackdowns is being strengthened via reinforced manpower at KIPO’s reporting center (composed of members of the Special Judicial Police with expertise in intellectual property) and improved investigation techniques, KIPO will likely respond to online infringement issues promptly. In order to effectively block the online distribution of counterfeit products, rights holders must actively cooperate with the IP office and online platforms. Under the current system, rights holders are responsible for the cost of an appraisal, so it may be burdensome for them to cooperate with all KIPO investigations. However, since it is not easy for KIPO and online platforms to assess counterfeit products and determine whether a product is genuine or counterfeit without the input of the rights holder, such input is necessary for effective investigations. Given current trends, the number of online transactions is expected to continue rising steadily and the number of online rights violations will likely increase alongside this. To protect brand value, IP rights holders should actively utilize the online crackdown systems available via KIPO and actively respond to its requests for an appraisal of suspected infringing products, even if this is burdensome. The proposed trademark law revision includes the introduction of provisions under which the following acts of sales intermediaries would constitute an infringement on the part of the sales intermediary itself (with liability limited when the intermediary fulfills its duty of care): permitting individual sellers to infringe a third party’s trademark rights or exclusive license; or intentionally assisting infringement by individual sellers. If this revision passes into law, online platforms would likely become more active in preventing sellers from infringing trademark rights, as the platforms could be held liable for indirect infringement if they do not fulfill their duty of care. Notes [1] The term “sales intermediary” used throughout this article typically refers to an online platform/open market via which individual sellers can sell goods, similar to platforms popular outside of Korea such as eBay and Amazon Marketplace. There are a number of prominent platforms like this in Korea.     Written by Jae-sang LIM  

2021-01-08
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Practice Notes

Doctrine of equivalents: recent developments

Shortcut to… Introduction / Supreme Court guidelines / Comment Introduction A patented invention is infringed when another invention (hereinafter the ‘accused invention’) comprises all elements of the patented invention and the relationship between the elements of the accused invention are the same as those in the patented claim (all elements rule). The all elements rule applies not only to literal infringement but also to equivalent infringement. Equivalent infringement is acknowledged when a specific modified element is evaluated as having equivalence to the corresponding element in the patented claim. According to the doctrine of equivalents, even when the accused invention includes a modified element in contrast with the elements in the patented claim, if they are practically equivalent, the accused invention infringes the patented invention. Supreme Court guidelines The Supreme Court has set the following guidelines for applying the doctrine of equivalents (Case 2017HU424, 31 January 2019): the accused invention and the patented invention must adopt the same problem-solving principle; the accused invention must exhibit substantially the same working effects as those of the patented invention (modifiability); a person with ordinary knowledge in the technical field to which the invention pertains (a person skilled in the art) must be able to obviously make such a modification (obvious modifiability); the accused invention should not represent art which was known at the time of filing the application of the claimed invention or art which could easily be conceived by a person skilled in the art from publicly known art (free-to-work technology defence); and the changed element of the accused invention should not represent that which was intentionally omitted from the claims of the claimed invention during the prosecution of the application of the claimed invention (file wrapper estoppel). In order to meet the infringement requirements based on the doctrine of equivalents, all of the above factors must be satisfied. If one of the negative conditions applies – namely, either the fourth or fifth factor, there is no infringement. The Supreme Court has specifically addressed the first factor as follows: When determining whether the accused invention and the patented invention adopt the same problem-solving principle, there should be substantial examination as to what the core of the technical idea forming the basis of the unique problem-solving principle of the patented invention is, in comparison with the prior art, taking into consideration the disclosures in the detailed description of the specification and known technologies at the time of filing of the patented invention. In particular, how broadly or narrowly to interpret the problem-solving principle of the patented invention should be determined according to the extent of the contribution made by the patented invention to the advancement of technology, in consideration of the prior art. According to this ruling, if the core of the technical idea was not already disclosed at the time of filing the patented invention, it must be determined whether the broadly interpreted problem-solving principle is implemented in the accused invention. If so, the first factor will be considered satisfied. Even if there are additional differences in the elements that are not directly related to the problem-solving principle, the first factor will still be considered satisfied. If this factor is satisfied in this way, the second factor will also be considered satisfied as long as the modified element has no significant difference in the working effects compared with those of the patented invention. In contrast, if the core of the technical idea was already disclosed at the time of filing the patented invention, since the problem-solving principle cannot be said to be unique to the patented invention, it must be determined whether the modified element has the same working effects in terms of individual functions or roles (Case 2018DA267252, 31 January 2019). Thus, in most cases, the second factor would be considered unsatisfied. Comment In accordance with these court rulings it is now possible for patents to be protected according to the real value of the invention, which is appraised in consideration of prior art. The problem is that judgments may vary with respect to what constitutes the core of the technical idea forming the basis of the unique problem-solving principle of the patented invention. As such, there is arguably increased uncertainty about the possibility for equivalent infringement.     Wirtten by Young-min KIM

2020-12-15
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Practice Notes

Treble Damages Now Available for Trademark and Design Infringement

Amendments to the Trademark Act and Design Protection Act effective from October 20, 2020 have added support for treble damages in certain infringement scenarios. The amendments are effective immediately and apply to acts of infringement conducted after October 20, 2020. Prior to the new amendment, damage compensation available to rights holders has generally been calculated based on (i) profits lost by the right holder due to the infringement, (ii) profits obtained by the infringer based on the infringement, or (iii) “ordinarily expected” royalties. This system, however, has flaws; namely, in the case of (i), damages are limited to the sales capacity of the rights holder (i.e. the damages cannot exceed that which the rights holder could have sold, even if the infringer committed significantly more infringement) — this is problematic especially where the infringer is a larger-scale entity than the rights holder, and in the case of (ii), damage calculation can be impacted by a non-cooperative infringer providing insufficient financial data. These amendments follow similar changes to the Patent Act and Unfair Competition Prevention and Trade Secret Protection Act relating to willful patent infringement and trade secret misappropriation which came into effect in July 2019. (See here for more details.) There are also changes to the way royalties are determined in damage calculation and the statutory damages available in trademark infringement cases. We will look at the amendments in more detail below. 1) Enhanced Damages (Trademark | Design) The new provision allows the court to multiply the damages calculated by one of the existing methods up to threefold in cases of intentional (willful) infringement, going some way to alleviate the inherent shortcomings described above. In determining the multiplier, the following factors are to be considered: Trademark Design The degree to which the distinctiveness or reputation of the infringed trademark has been tarnished The degree of intent or the extent to which the infringer was aware of the potential damage The amount of damage suffered by the trademark holder / exclusive licensee due to the infringement The economic benefits gained by the infringer The period and frequency of the infringement The fine for infringement The economic status of the infringer The degree of effort made by the infringer to alleviate damage Whether the infringer is in a position of superiority The degree of intent or the extent to which the infringer was aware of the potential damage The amount of damage suffered by the design right holder / exclusive licensee due to the infringement The economic benefits gained by the infringer The period and frequency of the infringement The fine for infringement The economic status of the infringer The degree of effort made by the infringer to alleviate damage It should be noted that in trademark infringement cases, willfulness is presumed when the fact of trademark registration is displayed. Specifically, any person who has infringed trademark rights or an exclusive license of another person who indicates that the trademark in question is registered shall be presumed to have been aware that the trademark was already registered, in relation to his/her infringement. (See here for more details about IP marking.) 2) Royalty Rate Used in Damage Calculation (Trademark | Design) There has also been criticism aimed at damage calculation method (iii) above in that it is not always possible or appropriate to determine an “ordinarily expected” royalty, for example in cases where there is not a standard royalty rate, or where an average rate may not be applicable to the case in question. The amendment changes this wording from “ordinarily expected” to “reasonably expected”, allowing for a calculation based on factors relevant to the specific case, rather than being based on existing precedent. 3) Statutory Damages (Trademark) Instead of calculated damages, trademark rights owners have been able to claim statutory legal damages since 2011, up to a capped limit of ₩50 million KRW (approx. $42,500 USD). This offers a way to claim damages from an infringer with a reduced burden to prove actual monetary damages incurred, instead allowing the court to determine the appropriate compensation based on the facts of the case. In consideration of changing market conditions and inflation, this cap has now been raised to ₩100 million KRW (approx. $85,000 USD) in cases of negligent infringement, and up to ₩300 million KRW (approx. $255,000 USD) in cases of intentional infringement.     Written by Ben YUU, Jonathan MASTERS

2020-10-28
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