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Jipyong News|KOREA LEGAL INSIGHT

‘Treble Damages’ for Trademark/Design Infringement and Idea Theft

2021.03.15

Korea is no stranger to intellectual property (IP) violations, and the difficulty of proving the amount of actual damages in the creative realm exacerbates the problem. However, a bill amending the (i) Trademark Act, (ii) Design Protection Act, and (iii) Unfair Competition Prevention and Trade Secret Protection Act (the “UCPA”) (the “Amendment Bill”) takes effect in April 2021, with the aim of “leveling-up” IP protection in Korea and increasing the relief available to IP right holders. In particular, the Amendment Bill expands the application of punitive (‘treble’) damages to trademark and design infringements and idea theft. Punitive damages are new to Korea, which is a jurisdiction that recognized only compensatory (‘actual’) damages until recently; and under current laws, punitive damages are only available in patent infringement cases. This will change once the Amendment Bill takes effect next month. This and other major elements of the Amendment Bill are discussed below. 
 
 
Major Elements of the Amendment Bill 
 
1. Introduction of ‘Treble Damages’ for Trademark/Design Infringement and Idea Theft and Changes to Compensatory Damages System 
 
■  Broader Application of ‘Treble Damages’ 
 
In 2018, the Patent Act and UCPA were revised to add punitive damages provisions, authorizing courts to award damages as a punitive measure of up to three times the amount of actual damages for intentional or willful patent infringement and trade secret misappropriation. The Amendment Bill further expands the applicability of punitive damages provisions to trademark/design infringement and idea theft cases. In particular, given the severity of damages suffered by small and medium-sized companies in idea theft cases, the Amendment Bill is intended to provide a higher level of protection to small and medium-sized companies against idea theft. 
 
■  Revised Basis for Royalty Damages Calculations 
 
The Amendment Bill revises the basis for damage calculations in trademark and design infringement cases. Currently, royalty damages are calculated based on royalty amounts a party may “ordinarily” be expected to receive in a given industry; but the Amendment Bill amends this basis to royalty amounts a party may “reasonably” be expected to receive. This is an important distinction, since under the previous calculation method, holders of higher-value trademarks or designs had to be satisfied with insufficient recoveries based on royalties that would “ordinarily” be expected in the given industry without consideration of the special or distinguishing features of their trademarks or designs that would justify higher royalties. To address this issue, the Amendment Bill prescribes that royalty damages be calculated on the basis of the actual values of trademark or design holders’ trademarks/designs to determine the amount of royalties they could “reasonably” demand on such basis. 
 
■  Increase in Statutory Damages 
 
The maximum amount of statutory damages for trademark infringement has been raised from KRW 50 million to KRW 100 million (KRW 300 million for intentional infringement). Statutory damages are amounts stipulated in the statutes and payable by the infringer regardless of the actual damages caused by the infringement. 
 
2. Changes to Patent Infringement Investigation and Prosecution. 
 
Partial amendments to the Patent Act were also passed with the Amendment Bill and take effect next month. Currently, criminal investigations of patent infringements may only be conducted if a criminal complaint has been filed. Under the amended Patent Act, the police or prosecutors may conduct independent criminal investigations into a patent infringement without complaint, although they will not be able to proceed with criminal charges and indictment without the victim’s agreement to press charges. This means patent holders will be able to file criminal complaints without regard to statutory limitation periods and police and prosecutors will be permitted to conduct independent criminal investigations of patent infringements. Moreover, leaving the control of prosecution/indictment with the patent holder effectively ensures that the only way a patent infringer may avoid criminal punishment is to compensate the patent holder (to the extent of actual damages) for the damages incurred from the patent infringement. 
 
3. Publication of Unfair Competitive Acts and Early Recovery of Damages through Dispute Resolution 
 
If a violator found guilty by the Korean Intellectual Property Office (“KIPO”) of unfair competitive acts fails to comply with the KIPO’s recommended corrective measures, the KIPO may publicly announce the violation. This amendment to the UCPA gives more “teeth” to KIPO’s administrative investigations and recommended corrective measures. 
 
The Amendment Bill also amends the administrative investigation procedures for unfair competitive acts to enable early recovery of damages through the dispute resolution process. If a party during an administrative investigation of alleged unfair competitive acts requests mediation by the Intellectual Property Rights Dispute Committee (“IPRDC”) pursuant to the Invention Promotion Act, the administrative investigation will be suspended pending mediation by the IPRDC; and if the dispute is resolved by the IPRDC, the administrative investigation will be terminated. 
 
 
Conclusion 
 
Korean lawmakers intend the broader application of punitive (‘treble’) damages to trademark/design infringements and idea theft to strengthen IP protection in Korea. However, as there are no court precedents yet applying treble damages to trademark/design infringements and idea theft, it will be useful to monitor how the amendments in the Amendment Bill will be applied in practice. Nonetheless, since the intent behind the Amendment Bill’s amendments is to strengthen IP protection in Korea, it is timely for IP right holders to consider how the amended laws may bolster their infringement claims; whereas, users of IP rights should ensure that their internal IP compliance systems are up to date and current to avoid unnecessary disputes.

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