An amendment to the Unfair Competition Prevention and Trade Secret Protection Act (the “UCPA”) was promulgated on March 28, 2023 and will become effective on September 29, 2023.
The amendment (i) recognizes the “Good Faith Prior User” case (defined below) as an exception to the scope of unfair competitive acts and (ii) adds the statute of limitations for the right to seek an injunction against idea theft.
The UCPA defines a range of unfair competitive acts, including (i) an act of using a mark similar or identical to another person’s mark, which is well-known in Korea, to cause confusion as to the source of a product or business (Article 2, Item 1, Sub-items (a) and (b) of the UCPA; hereby referred to as the act of “Consumer Confusion”) and (ii) an act of using another person’s idea without permission or allowing a third party to use it in the course of a transaction (Article 2, Item 1, Sub-item (j) of the UCPA; the act of “Idea Theft”). However, there has been considerable debate surrounding the existing UCPA provisions. In the case of Consumer Confusion, under the existing provisions, even if a person used a mark in good faith before a similar or identical mark pertaining to another person’s product/business became well-known (“Good Faith Prior User”), the person could be deemed to have committed an unfair competitive act. In the case of Idea Theft, the statute of limitations for the right to seek an injunction is not prescribed in the existing UCPA, and thus, an injunction could be sought against those who commit such an act for an indefinite period of time, thereby undermining legal stability.
The key provisions of the amended UCPA are as follows:
1. Good Faith Prior User Is Recognized as an Exception to Consumer Confusion
The UCPA defines Consumer Confusion as an act of unfair competition (Article 2, Item 1, Sub-items (a) and (b) of the UCPA). However, there have been heated discussions on whether the continued use of a mark that is identical or similar to that of another person’s product/business in good faith, before the other person’s mark became widely known, should be considered an unfair competitive act. The Supreme Court has maintained its position that such an act is an unfair competitive act because it is not defined as an exception under the UCPA (Supreme Court Decision 2002Da9011, March 25, 2004). Accordingly, there have been cases where the continued use of another person’s mark in good faith was found to be an act of unfair competition.
In order to protect Good Faith Prior Users from suffering unexpected consequences, the amended UCPA includes a new exception to the act of Consumer Confusion. Specifically, the amended UCPA prescribes that the exception to Consumer Confusion applies to the following scenarios: (i) where a person continues to use a mark identical or similar to another person’s mark or business identifier without any unfair purposes as he/she has been using it prior to it gaining widespread recognition in Korea and (ii) where a person continues to use the mark without any unfair purposes as a successor to a person who falls under the case (i) mentioned above.
The amended UCPA also notes that the existence of multiple persons using identical or similar marks may cause unexpected damage to the general consumer, and thus newly grants the legitimate owners of well-known marks the right to require Good Faith Prior Users to make and use labels as needed to prevent confusion and/or misunderstandings (Article 3-3 of the UCPA; “Right to Request Confusion Prevention”).
2. Statute of Limitations Is Added for the Right to Seek Injunction Against Idea Theft
Moreover, the UCPA also defines Idea Theft as an act of unfair competition (Article 2, Item 1, Sub-item (j) of the UCPA). Idea Theft is defined as an act of (i) improperly using information containing another person’s technical or business ideas having economic value in the course of a transaction negotiation or deal (e.g., business proposal, bid and public offering) for one’s own or a third party’s business interest in breach of the original purpose of providing such information, or (ii) providing such information to a third party for use. In addition, a victim is entitled to seek an injunction and damages against the person who committed Idea Theft.
One of the remedies available to a victim of Idea Theft is the right to claim damages. The statute of limitations for the right to claim damages is three years starting from the date on which the victim becomes aware of the damage and the identity of the tortfeasor or ten years starting from the date of the tort (Article 766 of the Civil Act). However, there is no separate statute of limitations to claim an injunction. Thus, it has been understood that a claim for an injunction could be pursued indefinitely without any statute of limitations, which may undermine legal stability. The amended UCPA newly includes a provision stipulating that “the right to seek an injunction against Idea Theft shall be extinguished by expiration of the statute of limitations if the right is not exercised (i) within three years starting from the date when the victim becomes aware of the fact that his/her business interest is infringed or likely to be infringed, and of the Idea Theft, or (ii) within ten years starting from the date when the Idea Theft commenced (Article 4, Paragraph 3 of the amended UCPA).”
The Amended UCPA excludes a Good Faith Prior User’s continuous use of another person’s product/business mark from the scope of unfair competitive acts, while granting the legitimate owner of a well-known mark the Right to Request Confusion Prevention Against a Good Faith Prior User in order to prevent misunderstanding and/or confusion among general consumers. As such, the legitimate owner of a well-known product/business mark in Korea may protect his/her product/business mark by exercising his/her Right to Request Confusion Prevention Against a Good Faith Prior User. In addition, as the statute of limitations for the right to seek an injunction against Idea Theft has been newly enacted, victims of Idea Theft should exercise their right to claim an injunction at an appropriate time before the lapse of the statute of limitations.