A bill to amend the Unfair

Competition Prevention and Trade Secret Protection Act (the “UCPA”) was

promulgated on April 17, 2018, and is scheduled to take effect on July 18,

2018.  The bill introduces significant

amendments to the UCPA, namely stipulating store interior designs as business

marks and making the unauthorized use of “ideas” an act of unfair competition,

thereby substantially expanding the applicability of Subparagraph 1 (j) of

Article 2 (“fraudulent use of another person’s product”) of the current (or

pre-amendment) UCPA.

1. Details of the Proposed

Amendments to the UCPA

Stipulation of Store Signs and Interior Designs as

Business Marks

Subparagraphs (b) and (c) of Article 2 of the current UCPA define an “act of

causing confusion of business entities” and an “act of harming

distinctiveness/reputation of well-known marks,” respectively, as follows:

(b)

An act of causing confusion with another person's commercial

facilities or activities by using marks identical or similar to, another

person's name, trade name, or emblem, or any other mark indicating another

person's business, which is widely known in the Republic of Korea.

(c)

In addition to the act of causing confusion provided in item

(a) or (b), an act of causing damage to distinctiveness or reputation

attached to another person's mark by using a mark identical or similar to,

another person's name, trade name, trademark, or container or package of

goods, or any other mark indicating another person's goods or business,

which is widely known in the Republic of Korea, or by selling, distributing,

importing, or exporting goods bearing such marks, without good cause

prescribed by Presidential Decree, such as for the purpose of noncommercial

use.

The current bill stipulates that “a mark indicating another person’s business” in items (b) and (c)

above includes the “methods of selling

products or providing services, or the overall appearance of a place of

business such as signs and exterior/interior designs.” (Subparagraph 1 (b) and (c) of

Article 2 of the amended UCPA)

In the so-called “red bean bread

case,” the Supreme Court ruled that the overall images of a business, including

the store’s outdoor signs, interior designs and store layout were equivalent to

the “outcomes achieved through substantial investment or efforts” as set forth

in Subparagraph 1 (j) of Article 2 of the current UCPA, and that the act of

imitating the relevant business’s overall images amounted to an act of unfair

competition under Subparagraph 1 (j) of Article 2 of the UCPA (Supreme Court

Judgment 2016Da229058 dated September 21, 2016). Based on the foregoing, even prior to the

introduction of the present bill, at least an argument could be made that the

“business’s overall appearance” should be entitled to protection pursuant to

Subparagraph 1 (j) of Article 2 of the current UCPA. However, by expressly

stipulating that the “business’s overall appearance” is included in the scope

of the business mark under each of Subparagraph 1 (b) and (c) of Article 2 of

the UCPA, the bill has removed any uncertainty which had existed under the

current UCPA on this point

Unauthorized Use of Ideas as an Act of Unfair

Competition

The amended UCPA introduces a new type of unfair

competition: “an act of fraudulently using any information, including another

person’s technical or business ideas with economic value, for one’s own or a

third party’s business gains, or providing the same to a third party for use,

in the course of business negotiation including business proposal, bidding or

public offering, or actual transactions.”

However, this will not apply if the person provided with any idea was

already aware of that idea at the time of being provided with the idea or if

such idea is widely known within the same industry (Subparagraph 1 (j) of

Article 2 of the amended UCPA). The

provision of Subparagraph 1 (j) in the current UCPA was moved to Subparagraph 1

(k) in the amended UCPA.

Under the current UCPA, ideas would have been protected

pursuant to Subparagraph 1 (j) of Article 2 of the UCPA, only if such ideas

amount to an “outcome achieved through substantial investment or efforts.” This provision has been much criticized for

being inadequate in restricting the acts of obtaining economic gains through

unauthorized use of another person’s ideas given the practical difficulty in

proving that such ideas are the “outcomes achieved through substantial

investment or efforts.” In response to

such criticism, the amended UCPA introduces the above-proposed provision with

an aim to actively protect novel or breakthrough ideas of small or venture

businesses and developers and maintain fair trade order.

Although the amended UCPA

excludes the unauthorized use of ideas from the acts subject to criminal

punishment (Article 18 (3)), it provides for enjoinment of acts of unfair

competition (Article 4) and the right to seek damages (Article 5). It also stipulates that the Commissioner of

the Korean Intellectual Property Office (KIPO) may conduct investigations or

recommend corrective action (Articles 7 and 8).

Allowing Courts to Request KIPO to Furnish Investigation

Records in Civil Lawsuits Seeking Money Damages

The amended UCPA stipulates three types of remedies for

acts of unfair competition: a civil right to request prohibition and a right to

seek damages (Articles 4 and 5); criminal punishment (Article 18 (3)); and

administrative remedy (Articles 7 and 8). As for the administrative remedy, the

Commissioner of KIPO may access the relevant business or manufacturing

facilities for investigation to verify any act of unfair competition as defined

in Subparagraph 1 of Article 2 of the UCPA (excluding items (h) and (k) in the

amended UCPA); and, if any act of unfair competition is discovered, the KIPO

Commissioner may issue recommendations for corrective action (Articles 7 and 8

of the amended UCPA). As the enforcement of such recommended corrective action

was not compulsory under the current UCPA, the administrative remedy was rarely

invoked in practice in relation to acts of unfair competition.

On the other hand, the amended

UCPA adds a new provision (Article 14-7 of the amended UCPA) to the effect that

“[i]n the event of a civil lawsuit seeking money damages under Article 5, the

court may, if necessary, request the KIPO to forward the investigation records

pertaining to the acts of unfair competition under Article 7 (including

examination records of interested parties, reference witnesses or appraisers;

stenographic records; and any other evidence for the trial).” This new

provision institutionalizes the methods of presenting KIPO’s investigation

records for the purpose of civil lawsuit seeking money damages.

2. Future Outlook and

Recommended Courses of Action

Disputes are expected to

increase in relation to the protection of “business’s overall appearance”

including store signs and interior designs under the amended UCPA. Whereas the overall appearance of the

business was protected under Subparagraph 1 (j) of Article 2 of the current

UCPA, now it is eligible for protection under items (b) and (c) and criminal

punishment is available for such act of unfair competition.

Further, the amended UCPA

stipulates that, if any idea with economic value is disclosed through business

proposal, bidding, or open contest, any unauthorized use of such idea may

constitute an act of unfair competition.

Interpretation of the phrase “another person’s technical or business

ideas with economic value” in the legislation is likely to result in a

significant controversy in practice and; with respect to actual disputes, the

elements of “fraudulent use” are expected to be a cause for controversy as

well. It is, therefore, necessary to

keep a close eye on the relevant developments in the years to come, including

any case law on this point.

As companies are often provided

with information relating to business proposals through various channels and

simultaneously seek business opportunities by offering their own business

proposals, they are advised to define accurate business processes and ensure

continuous operation of a compliance system to prevent any such practice from

evolving into a legal dispute down the road.

In addition, to prevent any dispute regarding the details of a proposal

submitted by any other parties in connection with a bidding or an open contest,

companies need to devise practical countermeasures by reviewing internal

regulations or notices regarding such bidding or open contest.

Lastly, the current bill was

introduced as part of an effort to strengthen protection of rights of

micro-enterprises, small businesses and developers, and such trend is expected

to continue in the near future.

This

update is intended as a summary news report only, and not as advice. For

legal advice, please inquire with your contact at Bae, Kim & Lee LLC, or

the following authors of this bulletin:

Taeck Soo KWON

82.2.3404.0310

E [email protected]

Jihyun KIM

T 82.2.3404.0180

E [email protected]

Tae Uk KANG

T 82.2.3404.0485

E [email protected]

Susan Park

T 82.2.3404.0274

E [email protected]