Korea: Limitations on use of direct imports by parallel importers

The Seoul Central District Court recently held that when it comes to advertisements, a parallel importer cannot use the ® symbol or the phrase "directly imported from", unless it actually imported the goods from that particular country (Case 2010Gahap75695, decided on September 17 2010).

In this case the plaintiff was the exclusive licensee for the mark PORTMEIRION in Korean and had an agreement with Portmeirion Group UK Limited for the exclusive importation and distribution of Portmeirion products in Korea. The defendant operated a large discount store under the name Lotte Mart and sold Portmeirion products that it had imported from a different source. The defendant advertised its items by stating that "[t]his is an opportunity to purchase Portmeirion's Botanic Garden Set directly imported from the United Kingdom at a reasonable price". The advertisement also used the ® symbol next to the mark PORTMEIRION. Based on this advertisement, the plaintiff filed an action against the defendant for infringement of the right of the exclusive licensee and violation of unfair competition laws.

The court acknowledged that the defendant's Portmeirion products were manufactured in the United Kingdom and thus were of the same quality as the plaintiff's goods. Further, the court stated that there was no trademark infringement or illegal activity behind the sale of such parallel imported goods. The court also pointed out that the defendant had the right to advertise its parallel imported goods, as long as such advertisements did not tarnish the trademark's function as a source identifier or lead to consumer confusion as to the source and quality of the products.

However, the court held that the defendant went beyond its permissible scope by using the ® symbol instead of simply using the PORTMEIRION mark to advertise its goods, because such ® symbol would mislead consumers into believing that the defendant was the rightful trademark owner or exclusive licensee. Thus, the court found infringement of the right of the exclusive licensee. Further, the court acknowledged that the PORTMEIRION mark is well known in Korea and ruled that the defendant had violated unfair competition laws by using the phrase "directly imported from the United Kingdom" because the defendant, a large discount store for various brands and goods, was considered to be using the PORTMEIRION mark to indicate one of its businesses, which would lead to consumer confusion that the defendant was the official local branch that imported goods directly from the United Kingdom (there was also evidence indicating that the defendant's goods came from a different country and not directly from the Portmeirion Group UK Limited).

As a result, the defendant was ordered not to use the ® symbol with the PORTMEIRION mark or PORTMEIRION in Korean transliteration in its advertisements and to destroy all remaining advertisements that contained the phrase "directly imported from the United Kingdom".

This decision is in line with an earlier Supreme Court decision (Case 99Da42322, decided on September 24 2002) where a parallel importer's use of a trademark on a signboard outside a store was considered to cause consumer confusion about the defendant being the official distributor of the trademark's owner. In light of the present case, which provides additional limitations on a parallel importer's use of a trademark, trademark owners and their licensees may wish to take a closer look at their specific use of the ® symbol and the phrase "directly imported from" in advertisements for parallel imported goods.

For further information on this topic please contact Eun-Seol Na or Nayoung Kim at Kim & Chang by telephone (+822 3703 1114), fax (+822 737 9091 3) or email (esna@ip.kimchang.com or nkim@ip.kimchang.com).

Contributed by Kim & Chang