[edit] Supreme Court Decision 2001Da73879 delivered on February 26, 2002 [Damages]

【Main Issues】

[1] Criteria for determination as a trade name that may give rise to confusion with the business of another under Article 23, Paragraph 1 of the Commercial Code

[2] Criteria for recognition of damage arising out of a so-called reverse confusion in use of trade name

【Summary of Decision】

[1] Article 23 Paragraph 1 of the Commercial Code provides that no person shall use a trade name that may give rise to confusion with the business of another person, for an improper purpose. A trade name that may give rise to confusion with the business of another person would not be limited to a trade name used for the same type business as that of such other person. However, in determining whether a trade name may cause a misunderstanding or confusion to ordinary consumers as to the identity of a business, it is necessary to comprehensively consider, based on comparison and observation of the two trade names in their entirety, whether they are closely related to each other in terms of the nature, substance, operating methods and customer base of the two businesses, so as to cause ordinary consumers to believe that the two business entities are related to each other, or whether the trade name of one entity clearly is widely known so that such entity gains absolute trust of ordinary consumers due to its reputation.

[2] If the business volume of a person who uses a trade name later (Later User) is larger than that of a person who used an identical or similar trade name earlier (Earlier User), and such trade name becomes widely known, and the Earlier User is subject to a misunderstanding that it has taken advantage of the Later User's fame or consumer faith due to the Later User's use of the trade name, thereby deceiving consumers into believing that the source of the Earlier User's products is the Later User, it cannot be said that there is no room whatsoever for recognition of liability of the Later User toward the Earlier User as damage arising out of the so-called reverse confusion. However, in light of the legislative intent of the Commercial Code and the Unfair Competition Prevention and Trade Secret Protection Act, which is to protect trade names, such damage arising out of reverse confusion cannot be recognized in case where the Earlier User's business is of a different type from the Later User's business, or is not closely related thereto in terms of nature or substance of business, method of business or consumer base.

【Reference Provisions】 [1] Article 23, Paragraph 1 of the Commercial Code / [2] Article 23, Paragraph 1 of the Commercial Code, Article 1 and Article 2, Item 1 of the Unfair Competition Prevention and Trade Secret Protection Act, Article 750 of the Civil Code

Article 1 of the Unfair Competition Prevention and Trade Secret Protection Act (Purpose) The purpose of this Act is to maintain sound order in transactions, by preventing acts of unfair competition such as improper use of a trademark, trade name, etc. of another that is widely known in Korea, and acts infringing upon a business secret of another.

Article 2 of the Unfair Competition Prevention and Trade Secret Protection Act (Definitions) Definitions of terms used in this Act are as follows:

1. The term "act of unfair competition" means any of the following acts, regardless of the purpose thereof:

(a) Act causing confusion with the goods of another by using a name, trade name, trademark, container or package of goods, or other mark identifying the goods, which is identical or similar to that of another which is widely known in Korea, or by selling, distributing, importing or exporting goods by use thereof.

(b) Act causing confusion with the business facilities or activities of another by using a name, trade name, emblem or other mark identifying the business, which is identical or similar to that of another which is widely known in Korea.

(c) Other than the acts causing confusion under Items (a) and (b), an act damaging the identity or fame of the mark of another, by using a name, trade name, trademark, container or package of goods, or other mark identifying goods or business, which is identical or similar to that of another which is widely known in Korea, or by selling, distributing, importing or exporting goods by use thereof, without justifiable grounds as prescribed by the Enforcement Decree such as non-commercial use.

(d) Act causing misunderstanding as to the place of origin of goods by placing a false mark of the place of origin, on the goods or in advertisement thereof, or on the transaction documents or communication in a manner that can be known to the public, or by selling, distributing, importing or exporting goods bearing such false mark.

(e) Act causing misunderstanding by placing a mark purporting that the goods were manufactured, produced or processed in a place other than the place where it was actually manufactured or processed, on the goods or in advertisement thereof, or on the transaction documents or communication in a manner that can be known to the public, or by selling, distributing, importing or exporting goods bearing such mark.

(f) Misrepresentation of goods as goods of another, advertising or placing on goods a mark that causes misunderstanding as to the quality, contents, manufacturing method, use or quantity of the goods, or selling, distributing, importing or exporting goods using such method or mark.

(g) Act of an agent or representative of a holder of rights to a trademark registered with any state party to the Paris Convention for the Protection of Industrial Property Rights ("Paris Convention"), any member state of the World Trade Organization, or any signatory state of the Trademark Law Convention, or to a trademark similar thereto, or any person who had been such agent or representative more than one year before the date of the relevant act in, of using the relevant trademark on goods identical or similar to the designated goods of the relevant trademark, without justifiable basis, or selling, distributing, importing or exporting goods using such trademark.

2.~3. <omitted>

【Reference Case】 [1] Supreme Court Decision 96Da24637 delivered on October 15, 1996 (Gong1996Ha, 3393)

【Plaintiff, Appellant】 Powercomm Chusik Hoesa (corporation) (Law Firm Barun, Attorneys Hong Ji-wook and 1 Other, Counsel for plaintiff-appellant)

【Defendant, Appellee】 Chusik Hoesa (corporation) Powercomm (Law Firm Bae, Kim & Lee, Attorneys Jung Sang-cheol and 1 Other, Counsel for defendant-appellee)

【Court of First Instance】 Seoul District Court Judgment 2000Gahap 37178 delivered on April 20, 2001

【Court of Second Instance】 Seoul High Court Judgment 2001Na25759 delivered on October 24, 2001

【Disposition】 The appeal shall be dismissed. All costs of this appeal are assessed against the plaintiff-appellant.

【Reasoning】 The grounds for appeal are examined as follows.

1. With respect to the issue of trade name right under the Commercial Code:

Article 23 Paragraph 1 of the Commercial Code provides that no person shall use a trade name that may give rise to confusion with the business of another person, for an improper purpose. A trade name that may give rise to confusion with the business of another person would not be limited to a trade name used for the same type business as that of such other person. However, in determining whether a trade name may cause a misunderstanding or confusion to ordinary consumers as to the identity of a business, it is necessary to comprehensively consider, based on comparison and observation of the two trade names in their entirety, whether they are closely related to each other in terms of the nature, substance, operating methods and customer base of the two businesses, so as to cause ordinary consumers to believe that the two business entities are related to each other, or whether the trade name of one entity clearly is widely known so that such entity gains absolute trust of ordinary consumers due to its reputation. (See Supreme Court Decision 96Da24637 delivered on October 15, 1996.)

According to the reasoning of the decision of the court below and the judgment of the court of first instance cited in the decision of the court below, the court below adopted the following facts based on the overall evidence it relied on in reaching its decision:

(i) The plaintiff was established on June 20, 1995, with its head office in Seoul and its corporate objectives being wholesale, retail sale, import and export of electronics components, electronic products and semiconductor products. The plaintiff originally conducted the above business under the trade name Seoju Semiconductor Component Co., Ltd., and changed the trade name to Powercomm Electronics Chusik Hoesa (corporation) on December 29, 1995, and then to Powercom Chusik Hoesa (corporation) on November 3, 1999, and effected registration of the respective changes.

(ii) Korea Electric Power Corporation (KEPCO) established the defendant by in-kind contribution of its optical networks and coaxial cable networks, etc, and provisionally registered the trade name as 'Powercomm Chusik Hoesa (corporation) on September 21, 1999. The defendant was established on January 26, 2000, with its head office in Seoul, and its corporate objectives being lease of telecommunications line facilities and composite cable broadcasting distribution networks and transmission networks business, and its trade name was registered based on the above provisional registration thereof, after which the defendant conducted the above business.

The court below then ruled that although it is accepted that the defendant uses or has used a trade name that is identical or similar to that of the plaintiff, the defendant's use of the trade name identical or similar to that of the plaintiff would not cause ordinary customers to confuse the defendant's business with the plaintiff's business, in view of the following facts that can be recognized based on the evidence relied on in reaching the decision, and rejected the plaintiff's assertion that the defendant is a person who uses a trade name which is likely to cause confusion with the business of another, under Article 23, Paragraph 1 of the Commercial Code.

(i) The business of lease of telecommunications line facilities, etc. conducted by the defendant and the business of wholesale, retail sale, export and import of the electronic components, electronic products and semiconductor components conducted by the plaintiff involve supply of goods and services that are different from each other.

(ii) The major customers of the plaintiff are electronic product manufacturers or consumers who demand electronic components, electronic products and semiconductor components, while those of the defendant are telecommunications business operators who use telecommunications line facilities, so that the consumer bases are different from each other.

(iii) The plaintiff's equity capital is 640 million won and its sales revenues in 2000 was 5.2 billion won, while the defendant's equity capital is 750 billion won and its sales revenues in 2000 was 258 billion won in the year 2000, so that there is a large difference in business volume.

Upon our review of the records and the legal principles discussed above, we accept the court below's findings and decisions above as justifiable. There existed neither impropriety of incomplete deliberation, nor adoption of facts against the rules of evidence, as alleged in the grounds for appeal. There was no misapplication of the law as to the trade name rights under the Commercial Code, as alleged in the grounds for appeal.

Insofar as the court below's determination was proper, the argument that the court below's hypothetical and supplementary determination that the defendant had no improper motive in using its trade name, to cause its business to be confused with the plaintiff's business, on the assumption that the defendant was a person who used a trade name that may cause confusion with the defendant's business, cannot be a valid reason for appeal.

2. With respect to the issue of the prohibition of unfair competition

According to the reasoning of the decision of the court below and the judgment of the court of first instance cited by the court below, the court below determined that the evidence presented, seemingly in conformity with the plaintiff's assertion that its trade name became widely known through its mark indicating its wholesale, retail sale, import and export of electronic products, electronic components and semiconductor components, are not credible, and that there was otherwise no evidence based on which that allegation could be accepted. On these grounds, the court below rejected the plaintiff's assertion that the defendant's use of its trade name constitutes an act causing confusion of business entity under the Unfair Competition Prevention and Trade Secret Protection Act (the UCPA). Upon our review of the records, we find no basis for reversal in the above findings and determinations of the court below due to the violation of the rules of evidence or the impropriety of incomplete deliberation, as alleged in the grounds for appeal.

3. With respect to the issue of reverse confusion

If the business volume of a person who uses a trade name later (Later User) is larger than that of a person who used an identical or similar trade name earlier (Earlier User), and such trade name becomes widely known, and the Earlier User is subject to a misunderstanding that it has taken advantage of the Later User's fame or consumer faith due to the Later User's use of the trade name, thereby deceiving consumers into believing that the source of the Earlier User's products is the Later User, it cannot be said that there is no room whatsoever for recognition of liability of the Later User toward the Earlier User as damage arising out of the so-called reverse confusion. However, in light of the legislative intent of the Commercial Code and the UCPA, which is to protect trade names, such damage arising out of reverse confusion cannot be recognized in case where the Earlier User's business is of a different type from the Later User's business, or is not closely related thereto in terms of nature or substance of business, method of business or consumer base.

The records show that the defendant's trade name became widely known in Korea as a mark indicating the defendant's business. However, no evidence could be found which would show that the defendant, having a larger business volume than the plaintiff, has intentionally or negligently used the trade name identical to that of the plaintiff, thereby causing a misunderstanding to ordinary consumers that the plaintiff took advantage of the defendant's reputation, thus damaging the credibility of the plaintiff. On the contrary, the plaintiff and the defendant are different from each other in terms of the goods and services they provide, their business size, business method and customer base, so that it is unlikely for ordinary consumers to believe that the entities conducting the two businesses are related to each other, as discussed above. As such, it cannot be said that the credibility of the plaintiff as the Earlier User has been damaged by use of the trade name of the defendant, the Later User.

The court below properly rejected the plaintiff's argument of damage arising out of reverse confusion for the same reason. In the decision of the court below, we find no reversible errors in matters of fact as to the rules of evidence as well as in matters of law regarding reverse confusion, as asserted in the grounds for appeal.

In a tort claim, the burden of proof as to the existence of an intentional or negligent act inflicting damage and occurrence of damage thereby lies with the party alleging it. As such, the court below properly imposed on the plaintiff the burden of proof as to damage arising out of reverse confusion, and the decision of the court below was not affected by any improper shifting of the burden of proof with respect to tortious act, as asserted in the grounds for appeal.

4. Conclusion

Accordingly, the appeal shall be dismissed and all costs of appeal are assessed against the losing party, and it is hereby decided as per Disposition. This decision is delivered with the assent of all Justices who reviewed the appeal.

Justices Lee Kyu-hong (Presiding Justice)

Song Jin-hun

Byun Jae-seung (Justice in charge)

Yoon Jae-sik

This is a legal document in the public domain according to Korean Copyright Law.