When does use of a trade name not infringe trademark rights? Korean Patent Court considers Trademark Act exception clause.

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