South Korea: Legal Issue: First Decision Recognizing Unfair Competition For Copying Store Signage And Interior Design

Last Updated: 18 January 2017
Article by Yulchon LLC

[Seoul High Court Decision No. 2015Na2044777, rendered May 12, 2016 (final due to the Supreme Court's refusal to grant review)]

Plaintiff, an owner of a red bean bread bakery, created a unique atmosphere in its store by differentiating various elements therein from other stores, such as its trademark, exterior sign, and store layout. Defendant, a former baker in the plaintiff's bakery, opened a red bean bread bakery in a nearby area merely four months after leaving the plaintiff's bakery. The defendant hired the plaintiff's interior designer to take photographs of the plaintiff's store, which the defendant used to copy the trademark, signs, store layout, and structure of the plaintiff's bakery. General consumers could not differentiate between the plaintiff's bakery and the defendant's bakery because they had a similar store atmosphere, sold the same products and were similarly conveniently located. As a result, the plaintiff filed a suit to enjoin the defendant from using the signage and design of the store interior and sought compensation for damages. The plaintiff's claim was that the defendant's conduct constituted acts of unfair competition under Article 2(1) (j) of the Unfair Competition Prevention and Trade Secret Protection Act ("Unfair Competition Act").

The Manual lists detailed requirements for various case management related matters, including (i) required items in written submissions (including complaints, answers, etc.), (ii) video conferences for receiving comments from the parties to separate out the issues and set a trial plan, (iii) management and planning of hearings for major legal issues, sub-issues and procedural issues, as well as due dates for submitting briefs, (iv) investigation of evidence and determining the need for expert testimony, and (v) preparation of various documents and submission of documentary evidence. Unlike in the United States, where only one hearing or trial is held, Korean cases on appeal may have several hearings or trials, each addressing specific issues.

The Seoul High Court substantively held as follows: (i) in a given type of business, the exterior of the store, its interior design, decorations, signs, or any combination thereof that creates an overall image of the store constitutes "outcomes, etc. achieved by [others] through substantial investment or efforts," which subparagraph (j) of Article 2(1) of the Unfair Competition Act was enacted to protect; (ii) although the plaintiff did not register the design of the interior elements of its store, the defendant's operation of its store is an unauthorized use by the defendant's business of the outcomes achieved by the plaintiff, through means that contradict industry custom and competitive order; and (iii) defendant's unauthorized use of the consumer appeal of the plaintiff's store image for the defendant's business constitutes infringement of the plaintiff's economic interest related to the sale of red bean bread. Therefore, the Court ordered the defendant to cease using the infringing store signs and store design and awarded the plaintiff compensation in the amount of KRW50 Million (approximately USD45,000).

Lessons and Implications

This is a case of first impression recognizing the applicability of Article 2(1)(j) of the Unfair Competition Act, which is a catch-all provision intended to confer protection despite non-registration of a trademark or design so that protection can be obtained against novel and various types of unfair competition that may arise from technological and other advances. As the decision provides the applicable scope and requirements of the legal principles applicable to subparagraph (j), it is expected to have a substantial impact on similar cases in the future. In particular, this case opened the possibility that the "overall image" of a business — namely, a combination of the exterior, interior design, decorations, and signs — will be protected despite not having registered these elements as a trademark. Such protection was not available under the Unfair Competition Act before enactment of subparagraph (j). The decision is also important because the Court held that designs are protected not only by the Design Protection Act, but also by subparagraph (j).

Originally published in the Winter 2016 Newsletter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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