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Feb 4, 2014

Protecting Your Brand in Korea: Parallel Imports

The Korean courts have been very reluctant to enforce prohibitions on the imports of non-counterfeit/grey market products into the Republic of Korea.  The following case is one example.

Don't fret, proactive counsel can be utilized to assist in developing strategies to protect your brand and distributor, agent, dealer or subsidiaries business in the Korean market.  Some of the strategies are obvious and some come from the unique gained from doing business in Korea.   

In Case No. 2009Ga Hap 125399 (Simmons Korea  vs. Karahan) Decided 12/10/2010, the Seoul Central District Court ruled that Simmons Korea could not prohibit the import of beds from parallel importer Karahan.  Karahan was importing Simmons beds from abroad.  Simons Korea was manufacturing beds in Korea under the Simmons name (licensed from Simmons to Simmons Korea).  Simons USA did not have an equity stake in the Simmons Korea entity.

The court reasoned that the regulation entitled: Notice on Treatment of Import and Export for the Protection of Intellectual Property of the Custom Service of Korea notes that the parallel import of non-counterfeit goods into Korea does not infringe the trademark of the trademark holder if:

1.  The Korean trademark registrant and foreign trademark registrant are the same entity, an affiliated entity and/or an agent of the holder.  Except in the case when an exclusive licensee manufacturers the goods by itself domestically.

2.  The Korean trademark registrant and foreign trademark registrant are not the same, but when the domestic registrant or an exclusive licensee imports and sells only genuine goods manufactured by the foreign trademark registrant. 

The Seoul Central District court held that the parallel import of Simmons beds from the United States does not infringe the trademark even though it seems to neatly fit into to: " Except in the case when an exclusive licensee manufacturers the goods by itself domestically" exception to the general rule.

The Seoul Central District Court reasoned that:
  • Simmons Korea did not gain independent techniques in creating the "pocket springs."
  • Simmons Korea products are similar in quality to the U.S. products.
  • Even though Simmons Korea is a separate legal entity with no ownership by Simmons USA of Simmons Korea, the Court opined that a relationship regarding the "division" of the trademark rights exists - thus not satisfying the exception.
  • Simmons Korea is treated as one in the same as Simmons USA by Korean consumers. 
The Korean courts have, also, been willing to impose sanctions for attempting to prohibit the import of grey market goods into Korea under Korean Antitrust/Competition laws.  I will followup next week with how to handle your parallel import issues in Korea.

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.