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You open your closet and notice an old luxury bag with frayed edges. It's old and a bit tattered, but as it's an expensive item from a prestigious label, you haven’t been able to find it in your heart to throw it away. However, if you can transform the old bag — that has certainly seen better days — into something new, wouldn't it be a novel idea to have a leather craftsperson turn it into a purse? That is, so long as the artisan is not breaking the law by doing so. Trademark law generally recognizes the right of the owner of a trademarked product, whether it be a handbag or a luxury car, to resell the item without permission from the manufacturer. Resale by the first purchaser of the original article under the manufacturer’s trademark is neither trademark infringement nor unfair competition. Trademark rights exhaustion, often referred to as the “first sale doctrine”, is a concept whereby once a trademark owner has sold a product bearing their trademark or granted permission for its sale, they are unable to prevent downstream owners from subsequently selling or reselling the same product. However, complications arise when a trademarked product is altered or dressed up in some way before being resold, or even when the product is reformed or transformed into an entirely different product for its owner. There was recently an interesting case in Korea dealing with this issue, which we will look at below. Seoul Central District Court: Case 2022GaHap513476 (October 2023) In this case, the plaintiff alleged that the defendant’s “reforming” of (genuine) goods bearing the Louis Vuitton trademark into different products constituted trademark infringement and/or an act of unfair competition. Specifically, the defendant offered a “reform” service of taking old or damaged goods and turning them into a new product — for example, taking a bag and transforming it into a different bag, or into wallets, card cases etc. The following example pictures are taken from the court decision: Before After The plaintiff’s claims were as follows: The defendant’s actions constituted “use” of the plaintiff’s trademark, specifically, producing the items corresponded to “[d]isplaying a trademark on goods or packages of goods” per Article 2(2)-11(a) of the Trademark Act, and returning the reformed product to the owner of the bag corresponded to “[t]ransferring or delivering goods or packages of goods on which a trademark is displayed” per Article 2(2)-11(b) of the same Act. The defendant’s sale of “reformed” products constituted “an act of doing damage to distinctiveness or reputation attached to another person's mark” per Article 2-1(c) of the Unfair Competition Prevention and Trade Secret Protection Act. The defendant’s rebuttals were as follows: The trademark owner’s rights were exhausted when the bags in question were first sold to consumers. The “reformed” bags were made per individual customers’ specifications and were returned to the same customer, with no intention of selling to third parties, and thus do not fall under the exception to trademark exhaustion (i.e. “processing or repair to the extent of damaging the identity of the original product”). Thus, no new products bearing the trademark were produced. The products in question cannot be considered “goods” for the purpose of “use of a trademark” under the Trademark Act, as the products are individually received from and subsequently returned to the same customer, so are not mass produced or distributed. Further, the marks are not used “as a trademark” as the bag owner would have no confusion concerning the source of the reformed product. While the court did not consider the unfair competition claim, it decided that the defendant’s actions were “trademark use” that infringed the plaintiff’s registered trademarks for identical/similar designated goods. In reaching this decision, several interesting points were discussed. The court confirmed that “reforming” of the products was beyond the scope of simple processing/repair; namely, as the reforming was of an extent where the identity of the original product was damaged, it was akin to an act of production and thus the trademark owner should still be permitted to claim the effect of trademark rights. In reaching this conclusion it was not considered relevant that the “reformed” products were only produced for the owner of the original product, and were not sold to third parties. Addressing the defendant’s rebuttals, the court decided that the products in question are able to be considered “goods” under the Trademark Act as they have inherent exchange value and are capable of being the object of independent commercial transactions. The scale of an infringer’s production capabilities were not considered relevant in protecting the source indication function of a trademark. While acknowledging that the products in question were not intended to be sold to anyone other than the original bag owner, and thus the recipient of the reformed goods would be unlikely to mistakenly believe they were manufactured and sold by the plaintiff, the court stated that general consumers could still be confused as to the source of the goods if the reformed products are viewed by or transferred to a third party. As a result, the defendant was ordered to cease production of “reformed” products using fabric/materials indicating the plaintiff’s trademark, and was ordered to pay compensatory damages of 15 million KRW (approx. $11,600 USD). In calculating damages, the court considered the defendant’s revenue attributed to the reformed products (23.8 million KRW, approx. $18,400 USD) but in the absence of data showing profit, and considering the lack of any evidence suggesting the reformed products were sold as used products, settled on a “reasonable amount of damages on the basis of the meaning of all pleadings and the result of the examination of evidence” per Article 110(6) of the Trademark Act. The decision is currently on appeal to the IP High Court. Comments While some have criticized the decision, arguing that the exhaustion of trademark rights should apply equally to the contractor carrying out “reform” work strictly upon request of the product owner, others have welcomed the judgement as it reduces the risk of consumer confusion and damage to the trademark owner’s reputation due to the creation of products that do not meet their quality control standards. In pursuing this claim, rather than seeking a sizable damages payout it is understood that Louis Vuitton wishes to protect the strong reputation its trademark enjoys by discouraging “reforming” by private contractors. If ultimately confirmed, this decision will be welcomed by brand owners as it would somewhat extend their ability to control use of trademarks beyond the first sale doctrine, and would likely result in a number of infringement lawsuits brought by luxury brand owners against other companies involved in similar “reform” practices. It is possible such a decision, if confirmed, would also extend to repair/refurbishment services in other consumer sectors such as automobile tuning, upgrading of electronic devices etc. which are typically carried out for the sole benefit of the owner of the product in question, and not for sale to third parties. Further clarification on this point, hopefully with specific criteria for determining at what point processing of an item results in damage to the identity of the original product, will be necessary to avoid consumer and business confusion. For the meantime, contractors offering aftermarket repair or refurbishment services will need to be more careful about crossing the line between “repair” and “reform” when carrying out customer’s requests. Any further updates on this issue following the appeal will be reported when available.
Following news shared earlier in the year about the likely introduction of a letter of consent system in Korea, the relevant bill passed the National Assembly in early October and the revised Trademark Act has recently been promulgated, with an effective date of May 1, 2024. The Act also contains several other amendments of note. Please refer to the following: Letters of consent In response to a refusal based on citation of a senior mark, a letter of consent from the owner of the senior mark may be submitted to KIPO in order to overcome the refusal ground. Further, the supplementary provisions to the amended Act clarify that letters of consent will be accepted even for applications filed before the effective date of the amendment, with the new rules applying at the time a decision on trademark registration is made by the examiner. In other words, from May 1, 2024 onwards a letter of consent may be submitted to overcome a refusal ground regardless of the filing date of the application. However, an exception is that letters of consent will not be accepted when the two marks in question are identical and both marks cover identical goods/services. A new cancellation ground applying to trademarks registered based on a letter of consent will also be available, and may be utilized in situations where anti-competitive use of the mark causes consumer confusion or deception. Division of International Registrations It is fairly common practice for applicants whose trademark application has been partially refused to divide out the problematic goods/services in order to register the remaining goods/services first. While such an option has been available for national applications in Korea, it has not been possible to do so for International Registrations unless the divided goods were being partially assigned to another party. This limitation has now been removed in the amended Act, so owners of International Registrations designating South Korea will also be able to divide their applications. Other The amended Act will further allow for: Extinguishment of rights following death of TM Owner: Currently, if the heir of a deceased trademark owner does not record the transfer of rights within three years of the date of death, the trademark rights expire. The amended Act further prescribes that if there is no known heir at the time of death, the trademark rights expire immediately. Automatic recognition of priority claim for converted applications: Where an application is converted from one type to another (e.g. additional goods registration to standard application, standard application to collective mark etc.), where the original application had a valid priority claim, the same will be recognized for the converted application. (This removes the current need to make the same priority claim for the converted application.) Easier replacement of national registration with International Registration: In cases where the Korean designation of an International Registration (IR) is for a mark identical to a national registered mark, is owned by the same party as said national registered mark, and the Korean designation of the IR mark was made after the registration date of the national mark, the application date of the IR mark will be deemed to be the application date of the national registration, with respect to any goods/services that overlap with those of the national registered mark. (This removes the current need for all goods/services of the national registered mark to be included in the specification of the IR mark.)
One useful feature of Korean design practice is the “related design” system, which currently allows a one-year period for filing designs similar to an existing “principal design” that would otherwise be refused protection based on similarity to said existing design. This one-year period starts from the filing date of the principal design. By utilizing this system, the scope of protection of the principal design can effectively be expanded. A practical use case is when incremental improvements/changes are made to an earlier design — by securing design protection for these changes, it becomes more difficult for other parties to circumvent the design rights and produce copycat designs. Applicants can indicate that their designs are a “related design” at the time of filing, or, if a later-filed application is refused based on similarity to a senior design owned by the same applicant, it can be designated as a related design of the principal design to overcome such a refusal ground. This principle also applies to embodiments within the same multiple-design application; if several embodiments are deemed to be similar, the applicant must select one as the principal design, and the others as related designs. Aside from the fact that related designs expire at the same time as the principal design on which they are based (i.e. a maximum of 20 years from the filing date of the principal design), related designs are effectively treated as separate and independent rights. For example, invalidation of the principal design does not result in automatic invalidation of any related designs. Some important considerations are that related designs cannot be “daisy-chained”, and must always be similar to the principal design. In other words, once a design is designated as a related design, it cannot subsequently act as a principal design for other later-filed designs. Further, if an exclusive license is recorded against a principal design, it cannot form the basis for any later-filed related designs. While this system is useful, there has been criticism that the one-year period for filing related designs was too short. To rectify this, an amendment to the Design Protection Act extending this period from one year to three years will come into effect from December 21, 2023. The new provisions will apply to related designs filed on or after December 21, 2023, but will not apply retroactively to designs for which the previous one-year deadline had already passed. Practically speaking, this means that designs with a filing date of December 22, 2022 or later will be able to act as a principal design for any related designs which are filed up to three years afterwards. The revision also clarifies that the principal design must be valid and in force at the time the design rights in a related design are established. This development will be of keen interest to applicants in all fields who wish to protect their designs in Korea, and we anticipate the longer window for filing related designs to be widely utilized once in effect. Written by Jonathan MASTERS
All trademark applications in Korea are examined for both absolute and relative refusal grounds, and refusals based on similarity with another party’s conflicting senior mark are commonplace. In fact, KIPO statistics indicate that approx. 40% of office actions issued against trademark applications in 2022 included a refusal ground due to conflict with a senior mark. In such situations, if the conflicting goods/services of the pending application are important to the applicant and cannot be deleted, trademark practitioners in Korea are often asked whether it is possible to obtain and submit a letter of consent from the owner of the senior mark, expressing their agreement to the co-existence of both marks on the register. This is a topic which has been considered by the IP office in the past, but to date the answer has always been negative, with letters of consent, co-existence agreements etc. not accepted by KIPO examiners. However, recent developments indicate that change is on the horizon. Current situation At present, the only practical way to achieve co-existence of conflicting marks on the register is to unify the ownership of the marks via assignment (with all relevant marks being owned by the same party) until the refusal ground is withdrawn and the junior application is granted registration. At this time, the original ownership can be restored via an assignment in the reverse direction. This is often referred to as a “temporary assignment” or “assign-back” procedure. However, even if both parties are cooperative, the additional complexity in securing agreements and the documentary requirements (notarized deeds of assignment being necessary at each stage, for example) make it significantly more time- and effort-intensive than simply obtaining a letter of consent. The complexity escalates even further if there are multiple senior marks owned by different parties, in which case unification of ownership may be a practical impossibility. Brand owners are also often unwilling to cooperate in such a procedure if it means relinquishing ownership of their marks — albeit temporarily — even in cases where they do not oppose the registration of the junior application. Possible changes In her New Year’s address, KIPO Commissioner Insil Lee specifically mentioned the need for a letter of consent system to enable easier coexistence of trademarks. Following this, a bill with amendments to the Trademark Act was submitted before the National Assembly on March 20, 2023 (link in Korean). The bill proposes the following changes: Allow a refusal ground based on conflict with a senior mark to be withdrawn if consent from the owner of the senior mark is obtained, except in cases where the respective marks and goods/services are identical. Allow for cancellation of a mark registered based on such consent, should the mark be used anti-competitively and cause consumer confusion. What's next? While the pending bill is still at the committee review stage and several more steps must be completed before its promulgation into law, considering the current context and opinion surrounding this issue we are optimistic that the proposed changes will pass through the legislative process and eventually come into effect. We will be monitoring the progress of the bill and will report on any noticeable developments. Written by Jonathan MASTERS
Introduction With the entry into force of the 14th edition of the Locarno Classification from 1 January 2023 (which applies to designs filed on or after this date), a number of design articles have moved to different classes. Some examples are set out in the following table. Previous class New class Article name 21-02 02-01 Waist supports for exercise 28-02 09-05 Lipstick tubes [packaging containers] 03-03 24-05 Crutches 02-03 29-02 Disposable face masks This is particularly relevant in South Korea as design applications follow one of two examination tracks — partial examination or full examination — based on the Locarno class of the design article.(1) At the time of writing, designs that fall under the following seven Locarno classes are subject to partial examination: class 01 – foodstuffs; class 02 – articles of clothing and haberdashery; class 03 – travel goods, cases, parasols and personal belongings, not elsewhere specified; class 05 – textile piece goods, artificial and natural sheet material; class 09 – packages and containers for the transport or handling of goods; class 11 – articles of adornment; and class 19 – stationery and office equipment, artists' and teaching materials. Designs in all other Locarno classes are subject to full examination. Looking at the examples in the above table, the first two articles will now be subject to partial examination in Korea, while the latter two will go through full examination. So, what is the difference? Partial examination This is a fast-track examination process for designs typically sensitive to trends or that have a short life cycle. The examination stage comprises a check of the following, but does not include a substantive examination of novelty or creativity: application formalities (eg, applicant details and suitability of drawings); basic formalities (eg, design cannot be similar to national flag or emblem, morally unsound, liable to cause confusion with another party or purely functional); industrial applicability; and limited novelty requirements (cannot be a "widely known" design or a combination of widely known shapes, patterns or colours). The examination timeframe for partial examination designs is typically around two to three weeks, so protection can be obtained rapidly. Another feature unique to partial examination designs is the existence of an opposition period following publication (laying open) of the design in the Design Gazette. Due to the limited novelty search carried out during examination, this provides an opportunity for any other parties to oppose the registration. The opposition period is three months from the date of publication. After this time, it is still possible for interested parties to bring an invalidation action. Most official fees are also lower for partial examination designs, including the application fee (currently ₩45,000 per design) and annuity payments, which are a fixed cost (currently ₩17,000 per year) for the lifetime of the design. Full examination As the name implies, this is a substantive examination process that, in addition to the partial examination details above, also includes a comprehensive prior art novelty search. Reflecting the more involved process, the examination timeframe for full examination designs is considerably longer — currently around six to 12 months. After registration and publication (laying open) in the Design Gazette, there is no opposition period. To contest the registration, an invalidation action must be brought. The official application fee for full examination designs is more than double that of partial examination designs (currently ₩94,000 per design) and, as with patents, the annuity fee payments increase over the lifetime of the design. Currently, they rise from ₩17,500 per year for years four to six to ₩105,000 per year for years 13 to 20. Written by Jonathan MASTERS
On November 25, 2022, the Korean Patent Court ruled on a case concerning limitations on the effect of registered trademark rights, specifically dealing with the question of whether one party’s use of a mark containing their own name, title, trade name etc. was “in accordance with generally accepted business practices” and thus outside the scope of rights of a similar registered trademark owned by another party. THE LAW Article 90 of the Korean Trademark Act (“Extent on Which Trademark Rights Do Not Have Effect”) provides that trademark rights do not extend to “[a]ny trademark using [another party’s] own name, title, or trade name, portrait, signature, seal, or well-known pseudonym, stage name, pen name, and the well-known abbreviated title thereof, in accordance with generally accepted business practices”, so long as such usage is not “for the purpose of unfair competition after registration and establishment of trademark rights”. (This wording was amended in 2016; in the old Trademark Act the restriction was applied to trade names etc. used “in a common way”.) The broad purpose of this clause is effectively to limit the effects of trademark rights in view of the intended spirit of the law and public interest. This does not equate to a limitation on the trademark holder’s right to exclusive use of the mark, but rather establishes the conditions under which another party’s use would be acceptable and non-infringing. According to Supreme Court precedent, using a trade name “in accordance with generally accepted business practices” means the name should be used in a way that does not create any special distinctiveness, for example by displaying in a unique font, color, stylization etc., and the location, arrangement, size of the name, combination with other elements, etc. are also considered. Overall, general consumers must be able to recognize that it is a trade name just by looking at the mark in question. Further, a “purpose of unfair competition” is understood as being an intention to obtain unfair profits by freeriding on the goodwill/credit of the registered trademark holder. In deciding on this point, subjective criteria such as the party’s motivation for selecting the mark, awareness of the registered trademark etc., and objective criteria such as similarity between the marks, fame of the registered trademark, similarity in business type and geographical proximity of business activities, as well as the actual use of the allegedly infringing party must be considered. THE CASE Aside from the specifics of the two parties’ respective marks, the complainant argued that the Court should apply the old Trademark Act in hearing this case; several grounds were put forward to support this argument, such as the complainant’s trademark being applied-for and registered before the amended Act came into force, as well as an argument that the wording of the revised Act suggests it should not apply to scope confirmation trials. However, the Court dismissed these arguments, deciding to apply the current (amended) Trademark Act. This meant that the respondent had to show their usage was “in accordance with generally accepted business practices”, rather than “in a common way”. The basic facts of the case are as follows: The complainant is the operator of “HASLLA ART WORLD”, a facility including a museum, gallery, hotel, restaurant and coffee shop (“HASLLA CAFE”), and is the owner of a trademark registration for “하슬라” [“HASLLA”] covering café and restaurant services in Class 43. The respondent is the operator of a café called “하슬라 가배” [“HASLLA GABAE”, where “GABAE” is an old-fashioned way of expressing the word “coffee”]. Both businesses are located in Gangneung City on the east coast of Korea. This case was an appeal from a scope confirmation trial heard by the IP Trial & Appeal Board (IPTAB) in which the complainant sought to show that the respondent’s use fell within the scope of their registered trademark rights. The specific usage in question was the respondent’s store signage shown below, where the smaller sign on the left reads “하슬라” [HASLLA”] written vertically, and the larger sign reads “하슬라 가배” [“HASLLA GABAE”], together with “Café” in English. [Respondent’s store signage] Note: Scope confirmation trials are inter-partes administrative procedures used to determine whether or not a specific usage of a mark falls within the scope of rights of another party’s registered trademark. Such trials are often filed alongside a civil infringement suit in which an injunction, compensatory damages etc. may be sought. As scope confirmation trials are heard by IPTAB subject matter experts, the decision — while not legally binding — may be submitted and carry weight in the civil suit. The Patent Court ultimately dismissed the appeal in favor of the respondent, upholding the IPTAB decision. This means that the defendant’s usage of their trade name “HASLLA GABAE” (in Korean) on signage for a café in Gangneung City is not considered an infringement of the registered “HASLLA” (in Korean) trademark. In reaching this decision, the Court considered the following, among other factors: Use in accordance with generally accepted business practices: The respondent’s trade name is “HASLLA GABAE”, which corresponds to the name used on the sign. The text is not expressed in a way that creates any special distinctiveness, and the addition of the English term “Café” is descriptive of the services offered. “Haslla” itself is the old name of Gangneung City used during the Goguryeo period (37BC – 668AD) of Korean history, and this is common knowledge among residents of the city. “Gabae” is a transliteration of the Chinese characters for coffee, and the term was widely used to refer to coffee during Korea’s period of enlightenment. The respondent seems to have conceived of the name by combining the old name for Gangneung City with the old term for coffee. Signboards with text surrounded by bulbs are commonly found across the country. Purpose of unfair competition: The complainant began operating a coffee shop in 2013, but has referred to it using various names over the years. An internet search for “Haslla Café” (in Korean) reveals posts predominantly concerning the complainant’s coffee shop, but results also contain the respondent’s store. While in the same city, the complainant’s and respondent’s stores are not in close proximity (approximately 17km apart). The concept and interior decoration of the stores are respectively different, with the respondent’s café being based on the theme of the Korean enlightenment period. The name “Haslla” is used in Gangneung City in road names, school and library names, festivals etc. Survey results show a high awareness of the meaning of “Haslla” among Gangneung City residents, and a reasonable awareness among residents of other areas in the same province. COMMENT This case provides some further clarification on how exceptions to registered trademark rights are considered under Article 90 of the Trademark Act. While the respondent’s trade name in this case included the registered trademark in its entirety and both parties operate similar businesses, this naturally does not mean that usage of a trade name provides blanket protection against trademark infringement in all cases. On the contrary, the way in which the trade name is used was considered in detail in the context of the specific location of the business, and in this case it was not considered that consumers would be confused. Ultimately, trademark owners do not need to be alarmed by this decision as the exception clause does not apply to bad faith usage — in cases of intentional infringement, trademark rights can still be enforced, regardless of whether the infringer is using a trade name. Written by Jonathan MASTERS and Sang-Eun SHIN