[South Korea] Amendment to Unfair Competition Law

A bill to amend the Unfair
Competition Prevention and Trade Secret Protection Act (the “UCPA”) was
promulgated on April 17, 2018, and is scheduled to take effect on July 18,
2018.  The bill introduces significant
amendments to the UCPA, namely stipulating store interior designs as business
marks and making the unauthorized use of “ideas” an act of unfair competition,
thereby substantially expanding the applicability of Subparagraph 1 (j) of
Article 2 (“fraudulent use of another person’s product”) of the current (or
pre-amendment) UCPA.

1. Details of the Proposed
Amendments to the UCPA

1. Stipulation of Store Signs and Interior Designs as
   Business Marks

   Subparagraphs (b) and (c) of Article 2 of the current UCPA define an “act of
   causing confusion of business entities” and an “act of harming
   distinctiveness/reputation of well-known marks,” respectively, as follows:

(b)

An act of causing confusion with another person's commercial
facilities or activities by using marks identical or similar to, another
person's name, trade name, or emblem, or any other mark indicating another
person's business, which is widely known in the Republic of Korea.

(c)

In addition to the act of causing confusion provided in item
(a) or (b), an act of causing damage to distinctiveness or reputation
attached to another person's mark by using a mark identical or similar to,
another person's name, trade name, trademark, or container or package of
goods, or any other mark indicating another person's goods or business,
which is widely known in the Republic of Korea, or by selling, distributing,
importing, or exporting goods bearing such marks, without good cause
prescribed by Presidential Decree, such as for the purpose of noncommercial
use.

The current bill stipulates that “a mark indicating another person’s business” in items (b) and (c)
above includes the “methods of selling
products or providing services, or the overall appearance of a place of
business such as signs and exterior/interior designs.” (Subparagraph 1 (b) and (c) of
Article 2 of the amended UCPA)

In the so-called “red bean bread
case,” the Supreme Court ruled that the overall images of a business, including
the store’s outdoor signs, interior designs and store layout were equivalent to
the “outcomes achieved through substantial investment or efforts” as set forth
in Subparagraph 1 (j) of Article 2 of the current UCPA, and that the act of
imitating the relevant business’s overall images amounted to an act of unfair
competition under Subparagraph 1 (j) of Article 2 of the UCPA (Supreme Court
Judgment 2016Da229058 dated September 21, 2016). Based on the foregoing, even prior to the
introduction of the present bill, at least an argument could be made that the
“business’s overall appearance” should be entitled to protection pursuant to
Subparagraph 1 (j) of Article 2 of the current UCPA. However, by expressly
stipulating that the “business’s overall appearance” is included in the scope
of the business mark under each of Subparagraph 1 (b) and (c) of Article 2 of
the UCPA, the bill has removed any uncertainty which had existed under the
current UCPA on this point

1. Unauthorized Use of Ideas as an Act of Unfair
   Competition

The amended UCPA introduces a new type of unfair
competition: “an act of fraudulently using any information, including another
person’s technical or business ideas with economic value, for one’s own or a
third party’s business gains, or providing the same to a third party for use,
in the course of business negotiation including business proposal, bidding or
public offering, or actual transactions.”
However, this will not apply if the person provided with any idea was
already aware of that idea at the time of being provided with the idea or if
such idea is widely known within the same industry (Subparagraph 1 (j) of
Article 2 of the amended UCPA). The
provision of Subparagraph 1 (j) in the current UCPA was moved to Subparagraph 1
(k) in the amended UCPA.

Under the current UCPA, ideas would have been protected
pursuant to Subparagraph 1 (j) of Article 2 of the UCPA, only if such ideas
amount to an “outcome achieved through substantial investment or efforts.” This provision has been much criticized for
being inadequate in restricting the acts of obtaining economic gains through
unauthorized use of another person’s ideas given the practical difficulty in
proving that such ideas are the “outcomes achieved through substantial
investment or efforts.” In response to
such criticism, the amended UCPA introduces the above-proposed provision with
an aim to actively protect novel or breakthrough ideas of small or venture
businesses and developers and maintain fair trade order.

Although the amended UCPA
excludes the unauthorized use of ideas from the acts subject to criminal
punishment (Article 18 (3)), it provides for enjoinment of acts of unfair
competition (Article 4) and the right to seek damages (Article 5). It also stipulates that the Commissioner of
the Korean Intellectual Property Office (KIPO) may conduct investigations or
recommend corrective action (Articles 7 and 8).

1. Allowing Courts to Request KIPO to Furnish Investigation
   Records in Civil Lawsuits Seeking Money Damages

The amended UCPA stipulates three types of remedies for
acts of unfair competition: a civil right to request prohibition and a right to
seek damages (Articles 4 and 5); criminal punishment (Article 18 (3)); and
administrative remedy (Articles 7 and 8). As for the administrative remedy, the
Commissioner of KIPO may access the relevant business or manufacturing
facilities for investigation to verify any act of unfair competition as defined
in Subparagraph 1 of Article 2 of the UCPA (excluding items (h) and (k) in the
amended UCPA); and, if any act of unfair competition is discovered, the KIPO
Commissioner may issue recommendations for corrective action (Articles 7 and 8
of the amended UCPA). As the enforcement of such recommended corrective action
was not compulsory under the current UCPA, the administrative remedy was rarely
invoked in practice in relation to acts of unfair competition.

On the other hand, the amended
UCPA adds a new provision (Article 14-7 of the amended UCPA) to the effect that
“[i]n the event of a civil lawsuit seeking money damages under Article 5, the
court may, if necessary, request the KIPO to forward the investigation records
pertaining to the acts of unfair competition under Article 7 (including
examination records of interested parties, reference witnesses or appraisers;
stenographic records; and any other evidence for the trial).” This new
provision institutionalizes the methods of presenting KIPO’s investigation
records for the purpose of civil lawsuit seeking money damages.

2. Future Outlook and
Recommended Courses of Action

Disputes are expected to
increase in relation to the protection of “business’s overall appearance”
including store signs and interior designs under the amended UCPA. Whereas the overall appearance of the
business was protected under Subparagraph 1 (j) of Article 2 of the current
UCPA, now it is eligible for protection under items (b) and (c) and criminal
punishment is available for such act of unfair competition.

Further, the amended UCPA
stipulates that, if any idea with economic value is disclosed through business
proposal, bidding, or open contest, any unauthorized use of such idea may
constitute an act of unfair competition.
Interpretation of the phrase “another person’s technical or business
ideas with economic value” in the legislation is likely to result in a
significant controversy in practice and; with respect to actual disputes, the
elements of “fraudulent use” are expected to be a cause for controversy as
well. It is, therefore, necessary to
keep a close eye on the relevant developments in the years to come, including
any case law on this point.

As companies are often provided
with information relating to business proposals through various channels and
simultaneously seek business opportunities by offering their own business
proposals, they are advised to define accurate business processes and ensure
continuous operation of a compliance system to prevent any such practice from
evolving into a legal dispute down the road.
In addition, to prevent any dispute regarding the details of a proposal
submitted by any other parties in connection with a bidding or an open contest,
companies need to devise practical countermeasures by reviewing internal
regulations or notices regarding such bidding or open contest.

Lastly, the current bill was
introduced as part of an effort to strengthen protection of rights of
micro-enterprises, small businesses and developers, and such trend is expected
to continue in the near future.

This
update is intended as a summary news report only, and not as advice. For
legal advice, please inquire with your contact at Bae, Kim & Lee LLC, or
the following authors of this bulletin:

Taeck Soo KWON

82.2.3404.0310