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Fashion Influencer Arrested in Connection With Large-scale Counterfeit Operation Following KIPO Special Judicial Police Investigation

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.

2023-09-21
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Practice Notes

Revisions to KIPO Official Fees as of August 1, 2023

Kindly note that there have been some revisions to KIPO official fees as of August 1, 2023.

2023-08-08
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Practice Notes

My Invention or Our Invention? - Intellectual Property High Court of South Korea Deliberates on the Joint Application Rule

My Invention or Our Invention? - Intellectual Property High Court of South Korea Deliberates on the Joint Application Rule According to Article 44 the Korean Patent Act, where the right to obtain a patent is jointly owned, the owners must apply for the patent jointly (referred to in this article as the “joint application rule”). One co-owner filing an independent application in violation of this rule constitutes a ground for invalidating the patent under Article 133(1)(2). The Intellectual Property High Court of South Korea recently applied this provision to invalidate a granted patent, in a dispute arising from a contractual research arrangement. This article addresses this thought-provoking result. Facts The case involved outsourced research: a university (“the University”) and a corporation (“the Corporation”) had entered into a research service contract according to which the Corporation was to conduct experiments using its own microorganisms and samples but with funding from the University, and submit a final research report at the end of the contract period. Importantly, the parties expressly agreed in the contract that any patent applications based on the results of the research would be made jointly by both parties. However, after the final research report was submitted and the research service contract had ended, the Corporation went ahead and independently filed a patent application based on the subject matter of the research. The patent was granted, and the University objected, asserting before the Intellectual Property Trial and Appeal Board (IPTAB) that, due to the contract, they at least co-owned the right to obtain a patent for the invention. The IPTAB agreed, and invalidated the patent as violating the joint application rule of Article 44. The Corporation appealed to the Intellectual Property High Court. Faced with the unambiguous language of the contract, the Corporation’s assertion was that the invention in their application was in fact a new, independent invention, and was thus outside the ambit of the contract and the joint application rule. The gist of their assertion was as follows: After the contract ended, they took an additional research step, adding a new ‘food’ for the microorganisms that had not been used during the contract period. This addition resulted in an unexpected effect. This effect was only confirmed – and the invention thus only completed – after the contract had ended. The addition was the result of their independent efforts The invention was thus their own independent invention, for which they alone held the right to obtain a patent. Decision The court disagreed with the Corporation and upheld the IPTAB’s judgment, holding that the invention was in fact completed during the contract period, and the invention was identical to the result of the contract. Thus, the invention fell within the scope of the contract, and the right to obtain a patent for the invention was jointly owned. The Corporation’s independent application thus violated the joint application rule, and the patent was invalidated. Commentary When is the invention a new invention? Due to the cumulative and often collaborative nature of modern scientific research, the question of when an invention that builds on previous collaborative research is new and independently patentable, and when it is not, is an important one in the research field. A key takeaway from the present case is thus how the court addressed this question. In finding that the Corporation’s invention was the same as the result of the research, the court based its opinion on the following factual and legal grounds: An alleged new effect must in fact be demonstrated with objective evidence, and must not have already been confirmed by the collaborative research The court found that the Corporation’s alleged new effect was in fact already detailed in the final research report, and the result of the research service contract can be said to be a completed invention. The alleged new features and effects must be adequately claimed The Corporation’s alleged addition and the effect thereof were not explicitly recited in the claims or the specification. The invention must be inventive over the findings of the collaborative research The court found that the Corporation’s addition was an obvious step that would normally be adopted by a person skilled in the art, and it thus cannot be regarded that the addition resulted in a separate invention different from the result of the research. Thus, for the invention to be a new invention, beyond the obvious requirements that the new features and effects must actually be demonstrated and must be adequately claimed, they must also involve an inventive step. Rather than a novelty standard of sameness or substantial sameness, the court here applied the inventiveness standard of obviousness; a more onerous standard for parties in the Corporation’s position. While the court quickly disposed of this question in the present case, the inventiveness inquiry can be expected to be the key area of contention in less clear-cut cases. For example, even in a case where a later novel addition involving substantial independent efforts is clearly made, the court may still find that the invention is not new and independent if it lacks an inventive step. Questions of strategy While the University in this case was seeking the invalidation of the patent, it should be noted that this is not the only remedy for a violation of Article 44. Under Article 99-2 of the Korean Patent Act, a party co-owning the right to obtain a patent can also request the court to transfer their share in the granted patent. As such, rather than taking the destructive step of invalidating the patent entirely, a party in the University’s position could instead take the more constructive step of claiming their share in the patent. Furthermore, invalidation actions here can only be brought by a party claiming to be a joint owner, thus affording the parties the leeway to resolve their dispute between themselves without the possibility of a third-party invalidation action. The University in this case opted, so to speak, for the ‘nuclear option,’ when a more cooperative approach could have kept the patent alive and allowed both parties to share in its benefits. Finally, this case highlights the importance of the contract. It was the research contract itself that created the joint right to obtain the patent and brought this dispute into the ambit of Article 44. Parties to research contracts should thus be keenly aware of terms dealing with future patent application rights, and carefully draft them in such a way as to anticipate future disputes.   Written by Ben YUU and Simon VOGET   Endnotes Case 2022Heo4949, June 16, 2023

2023-07-31
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