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

Korean trademark law provides that if a registered trademark is not used properly in Korea for a three-year period following its registration, any third party may request cancellation of the mark. To avoid a trademark being cancelled due to non-use, there is no other way but to actually use the registered trademark in Korea. However, even in case the trademark is actually used in some way, this does not necessarily mean that the mark is considered as being used for the designated goods covered by the trademark registration. What are the “goods” here? This issue was recently considered by the Korean Patent Court (Case 2020Heo2901, November 26, 2020).

Background

The owner of the trademark this case pertains to provides an app-based matchmaking service. The trademark “ditto” was registered covering the Class 09 goods ‘downloadable computer software’.

The app with the “ditto” trademark was launched in both the Apple Store and Google Play Store, available to anybody as a free download. The app is an online platform configured to allow users to create a profile based on their personal information (nickname, age, location, occupation, etc.) and an uploaded picture, with users able to view each other’s profiles within the app to express interest and exchange information. Many services are available free-of-charge, but viewing other users’ profiles or sending messages to other users is available only via in-app purchases.

IPTAB Trial

A trial to revoke the trademark registration was requested by a third party claiming that the mark had not been used in Korea on “the designated goods” for at least three years without justifiable grounds. What is the app then, if not a kind of goods?

In this first instance trial, it was alleged that the app does not satisfy the requirements of trademark use because there are no independent transactions with exchange value in and of themselves (in other words, there is no transaction in the form of a product being sold to users in return for payment), and rather, the app is simply a product provided in the running of a matchmaking service.

According to theory established by the Korean Supreme Court, the term “goods”, when in the context of a trademark used with a product, refers to an independent object of commerce with an exchange value that is capable of circulation in the commercial market. Goods which function as an advertising medium, which are distributed free-of-charge for the purposes of product advertising or sales promotion, and which are unlikely to be circulated in the commercial market, are not considered “goods” fulfilling the use requirements of a trademark.

This line of argument was accepted by the IP Trial and Appeal Board (IPTAB), who rendered a decision to cancel the trademark registration.

Appeal Court Decision

The trademark rights holder appealed the IPTAB decision to the Patent Court, which reversed the decision. In doing so, it was noted that while the app can be downloaded for free from the Apple Store and Google Play Store, the plaintiff obtains profits from consumers’ in-app purchases paid for while using the app. Accordingly, it was judged that the app is not merely incidental to the matchmaking service business, but is in fact an independent object of commerce with an exchange value and thus considered as “goods” for the purposes of trademark use.

Take Aways

It is well-established theory that goods in the context of trademark use are independent objects of commerce with exchange values. The definition does not cover goods functioning merely as an advertising medium typically distributed free-of-charge.

However, even if free apps appear to be freebies offered without conditions, they may be considered to have an exchange value especially when they include a way for users to pay fees associated with the app, or if users are required to view advertisements — from which the trademark owner profits — at some point while using the app. In such case, the app is likely to be considered as commercial “goods”.

As such, the Patent Court was not concerned simply with the fact that the app was free to download, but also considered the method of usage, ways in which transactions take place, as well as general commercial conditions etc., and further there was analysis of whether the trademark rights holder obtains profit from app-related fees paid by users.

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    2021-08-13 12:23:53

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