Amendments to the Trademark Act and Design Protection Act effective from October 20, 2020 have added support for treble damages in certain infringement scenarios. The amendments are effective immediately and apply to acts of infringement conducted after October 20, 2020.

Prior to the new amendment, damage compensation available to rights holders has generally been calculated based on (i) profits lost by the right holder due to the infringement, (ii) profits obtained by the infringer based on the infringement, or (iii) “ordinarily expected” royalties.

This system, however, has flaws; namely, in the case of (i), damages are limited to the sales capacity of the rights holder (i.e. the damages cannot exceed that which the rights holder could have sold, even if the infringer committed significantly more infringement) — this is problematic especially where the infringer is a larger-scale entity than the rights holder, and in the case of (ii), damage calculation can be impacted by a non-cooperative infringer providing insufficient financial data.

These amendments follow similar changes to the Patent Act and Unfair Competition Prevention and Trade Secret Protection Act relating to willful patent infringement and trade secret misappropriation which came into effect in July 2019. (See here for more details.)

There are also changes to the way royalties are determined in damage calculation and the statutory damages available in trademark infringement cases. We will look at the amendments in more detail below.

1) Enhanced Damages (Trademark | Design)

The new provision allows the court to multiply the damages calculated by one of the existing methods up to threefold in cases of intentional (willful) infringement, going some way to alleviate the inherent shortcomings described above. In determining the multiplier, the following factors are to be considered:

It should be noted that in trademark infringement cases, willfulness is presumed when the fact of trademark registration is displayed. Specifically, any person who has infringed trademark rights or an exclusive license of another person who indicates that the trademark in question is registered shall be presumed to have been aware that the trademark was already registered, in relation to his/her infringement. (See here for more details about IP marking.)

2) Royalty Rate Used in Damage Calculation (Trademark | Design)

There has also been criticism aimed at damage calculation method (iii) above in that it is not always possible or appropriate to determine an “ordinarily expected” royalty, for example in cases where there is not a standard royalty rate, or where an average rate may not be applicable to the case in question.

The amendment changes this wording from “ordinarily expected” to “reasonably expected”, allowing for a calculation based on factors relevant to the specific case, rather than being based on existing precedent.

3) Statutory Damages (Trademark)

Instead of calculated damages, trademark rights owners have been able to claim statutory legal damages since 2011, up to a capped limit of ₩50 million KRW (approx. $42,500 USD). This offers a way to claim damages from an infringer with a reduced burden to prove actual monetary damages incurred, instead allowing the court to determine the appropriate compensation based on the facts of the case.

In consideration of changing market conditions and inflation, this cap has now been raised to ₩100 million KRW (approx. $85,000 USD) in cases of negligent infringement, and up to ₩300 million KRW (approx. $255,000 USD) in cases of intentional infringement.