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Introduction / Measures / Comment

Introduction

The Korean Intellectual Property Office (KIPO) recently announced its Measures to Prevent Online Counterfeits. According to a KIPO press release, the number of reports concerning online counterfeits has increased by 204.4% year-on-year (looking at the period of January to August 2019 and 2020) following the increase in online shopping during the COVID-19 pandemic.

In response, KIPO has devised the following measures to more effectively combat the rapidly increasing online distribution of counterfeit products while minimizing damage to consumers.

Measures

Strengthened online crackdowns
Offline enforcement personnel are temporarily handling online monitoring.

The Special Judicial Police are:

• directly investigating mass distributors and frequent sellers of counterfeit products;
• reinforcing investigative manpower; and
• promoting the advancement of investigation techniques, such as digital forensics.

Improved damage relief for consumers
In cooperation with trademark holders, the results of a counterfeit product evaluation are shared with consumers to enable unsuspecting purchasers of counterfeit products to receive refunds and request compensation.

A damages compensation system has been established, under which online open market platforms compensate for damage resulting from the purchase of counterfeit products first and then claim indemnity from the individual seller.

System improvements and increased public-private cooperation
It is proposed that trademark law be revised to make sales intermediaries [1]  such as online platforms, responsible for preventing trademark infringement in order to halt the distribution of counterfeit products.

Comment

Given that the capacity for handling online crackdowns is being strengthened via reinforced manpower at KIPO’s reporting center (composed of members of the Special Judicial Police with expertise in intellectual property) and improved investigation techniques, KIPO will likely respond to online infringement issues promptly.

In order to effectively block the online distribution of counterfeit products, rights holders must actively cooperate with the IP office and online platforms. Under the current system, rights holders are responsible for the cost of an appraisal, so it may be burdensome for them to cooperate with all KIPO investigations. However, since it is not easy for KIPO and online platforms to assess counterfeit products and determine whether a product is genuine or counterfeit without the input of the rights holder, such input is necessary for effective investigations.

Given current trends, the number of online transactions is expected to continue rising steadily and the number of online rights violations will likely increase alongside this. To protect brand value, IP rights holders should actively utilize the online crackdown systems available via KIPO and actively respond to its requests for an appraisal of suspected infringing products, even if this is burdensome.

The proposed trademark law revision includes the introduction of provisions under which the following acts of sales intermediaries would constitute an infringement on the part of the sales intermediary itself (with liability limited when the intermediary fulfills its duty of care):

• permitting individual sellers to infringe a third party’s trademark rights or exclusive license; or
• intentionally assisting infringement by individual sellers.

If this revision passes into law, online platforms would likely become more active in preventing sellers from infringing trademark rights, as the platforms could be held liable for indirect infringement if they do not fulfill their duty of care.

Notes

[1] The term “sales intermediary” used throughout this article typically refers to an online platform/open market via which individual sellers can sell goods, similar to platforms popular outside of Korea such as eBay and Amazon Marketplace. There are a number of prominent platforms like this in Korea.

Written by Jae-sang LIM