On September 14, 2023, the Director of KIPO’s Intellectual Property Protection & International Cooperation Bureau announced that an SNS fashion influencer had been arrested in connection with the manufacture and sale of counterfeit luxury-brand items.
The influencer, referred to as “Miss A”, was the CEO of a company which was established in 2021 and had six other employees involved in marketing, finance, order management, product packaging, shipping, and customer management. Miss A used her position as a prominent fashion influencer to promote products and sell to buyers via a secret membership system limited to customers with high purchasing power. In an attempt to avoid detection, the sales were invite-only and limited to a short time frame on weekends.
Starting from November 2020, the enterprise achieved a total of 2.43 billion won (approx. $1.8 million USD) in criminal profits, with an equivalent genuine item price of around $25 million USD. All together 58 brands were counterfeited, including both Korean and foreign brands, with over 20,000 items of clothing, shoes and jewelry produced.
It was revealed that Miss A already had previous convictions relating to the sale of counterfeit products, based on violations of trademark law. However, as these earlier offences only resulted in fines of between 2-4 million won (approx. $1,500-3,000 USD), far less than the profit illegally obtained, it is clear that they did not act as an effective deterrent.
To avoid infringing trademark laws, Miss A re-created the designs of luxury goods but attached her own labels to the imitation products. The imitation products were often based on new designs which had not yet been released in Korea, but which Miss A had early access to as a VIP luxury brand customer.
Comparison of counterfeit (L) vs genuine (R) products, and display of confiscated items. (Source: Korean Intellectual Property Office)
(For reference, designs are protectable for up to 20 years in Korea if formally applied for and registered at KIPO, while unregistered designs are afforded protection against “dead copy” knockoffs for a period of three years following their realization under unfair competition laws. Design applications for fashion items such as clothing and footwear are subject to “partial examination” in Korea, with registration usually granted in around two weeks. More information available here.)
The enterprise did not produce the products themselves but utilized a network involving Korean clothing manufacturers, jewelry manufacturers and shoe manufacturers, as well as Korean clothing wholesalers based in Shenzen, China. These other entities — a total of 14 manufacturers — are also currently being investigated and indictment is expected soon.
Following a complaint in December 2022, the Technology & Design division of the KIPO Special Judicial Police (SJP)[1] began an investigation, revealing the systematic and large-scale nature of the operation. In addition to a search and seizure warrant executed on the residence and corporate office of Miss A, the court, in cooperation with the Daejeon District Prosecutors' Office Patent Crime Investigation Department and Crime Proceeds Recovery Team, collected and preserved assets including financial accounts, bonds and real estate property following an asset investigation. A preliminary arrest warrant was issued for Miss A during the investigation and a total of eight people, including the other six employees involved in the enterprise, have been referred to the Prosecution.
From a legal perspective the result is significant in that it is the first case where criminal proceeds have been preserved based on a violation of design or unfair competition laws. It is also the largest amount which has been recovered in a single operation by the KIPO SJP since its creation. This was possible due to a January 2022 amendment of the Act On Regulation And Punishment Of Criminal Proceeds Concealment — a law which inter alia deals with the confiscation and collection of criminal proceeds, but which previously only applied to violations of a set of specific laws. While the Trademark Act was included in this earlier list, the law now more broadly covers crimes that carry a criminal penalty of three or more years’ imprisonment, thus extending to design and unfair competition laws which were previously not included.
NOTES:
[1] The term Special Judicial Police (SJP) refers to judicial police with investigative powers limited to a specific area requiring specialized knowledge. The KIPO Special Judicial Police, which has the authority to conduct criminal investigations and raids, is organized under KIPO’s Intellectual Property Protection & International Cooperation Bureau and is composed of officers with expert knowledge of IP laws, including PhD holders, patent attorneys, lawyers and forensic experts. When founded in 2010 the KIPO SJP’s jurisdiction was limited to the investigation of trademark infringements, but has since grown to encompass design, patent, and trade secret violations. The KIPO SJP are commonly referred to as the “Trademark Police” or “Technology Police”, depending on the relevant division.