10. Prohibition on Registering Trademarks Identical with or Similar to a Nullified Trademark Case

[21-1(B) KCCR 91, 2006Hun-Ba113· 114, April 30, 2009]

In this case, the Constitutional Court held that a provision of the Trademark Act which prohibits people from registering trademarks identical with or similar to an invalidated trademark previously registered by another person violates the Constitution on grounds that it infringes their property rights and the freedom of occupation.

Background of the Case

The petitioner, a producer of electric beds and mattress pads, filed a trademark application and had his trademark "Jang-Soo" registered in 1987. In 1998, Park ○-ja successfully applied to register a trademark similar to "Jang-Soo". Then, the petitioner registered another trademark "Jang-Soo ○○" in 2004 and filed a lawsuit seeking nullification of Park ○-ja's trademark, arguing that it was similar to his registered trademark "Jang-Soo", in which case the court decided to nullify Park's registration on July 23, 2004. Meanwhile, an interested person Lee ○-ahn also filed a complaint in 2006 to seek nullification of the petitioner's registered trademark "Jang-Soo ○○" on grounds that it was similar to Park's nullified trademark.

The Trademark Act bans the registration of trademarks which are identical with or similar to another person's registered trademark applied for previously and are to be used on goods identical with or similar to the designated goods. Further, the provision under review in this case (hereinafter, the "Instant Provision") provides that a trademark is unregistrable even when its registration is applied for after the existing identical or similar trademark is invalidated. Pursuant to the Instant Provision, in the case filed by Lee ○-ahn against the petitioner of this case, the Korean Intellectual Property Tribunal nullified the petitioner's trademark "Jang-Soo ○○". In response, the petitioner sought cancellation of the decision invalidating his trademark, filing a motion to request for the constitutional review of

the Instant Provision, arguing that it infringed on his property rights, etc. As the motion was denied, however, he filed this constitutional complaint on December 27, 2006.

Provision at Issue

Trademark Act (revised by Act No. 5355 on August 22, 1997)

Article 7 (Unregistrable Trademark)

(3) Section 1 Items 7 and 8 shall apply to a trademark (including the case of other person's trademark is nullified according to Article 71 (3)) which falls thereunder at the time of the application for trademark registration. (below is intentionally omitted)

Summary of the Decision

In a vote of 8 (unconstitutional) to 1 (constitutional), the Constitutional Court held that the Instant Provision violated the Constitution according to the following reasons.

1. Court Opinion

A. Restricted basic rights and standard of review

The trademark right, an exclusive right to use the registered trademark (Article 50, Trademark Act), is a property right protected under the Constitution, and regulating the sale of goods under the trademark desired by producers and sellers, such as the petitioner, restricts their freedom of occupation.

Indeed, legislators are entitled to extensive legislative discretion over the requirements and procedures of trademark registration. Nevertheless, if the measure employed by legislators to protect the trademark right is extremely unreasonable and exceeds the legislative limitations by infringing on people's property rights, etc., such legislative action violates the Constitution.

B. Application for and Registration of Trademarks

The Korean Intellectual Property Office has, irrespective of the Provision, the authority to reject the registration of a trademark if, at the time of application of its registration, there is another identical or similar trademark already registered. Even if the existing registered trademark is invalidated by a decision of nullification, consumers will still have the memory and credit of the trademark for a certain period of time, in which case immediate permission of other similar or identical trademarks may cause misunderstanding or confusion among consumers. However, the Trademark Act resolves the problem by providing that registration of identical or similar trademarks may be rejected if one year has not elapsed from the date of extinguishment of the existing trademark right and by limiting the registrable trademarks to those not likely to cause consumers' misunderstanding and confusion for not having been used for over one year from the extinguishment of the trademark right. Therefore, applying the Instant Provision at time of application for trademark registration barely serves the legislative purpose of preventing consumers' misunderstanding and confusion by regulating the coexistence of identical or similar trademarks.

C. Decision on Nullification of Registration

The Instant Provision makes it possible to nullify a trademark identical with or similar to another person's existing trademark even if the decision to invalidate the latter is finalized. In this case, because an identical or similar trademark already in place when the decision to nullify the existing registered trademark became final and conclusive, newly nullifying the identical or similar trademark registered later on does little to serve the legislative purpose of preventing consumers' misunderstanding and confusion. Rather, the Instant Provision contradicts the "retroactive effect" of the trademark right (Article 71 Section 3, Trademark Act) and causes confusion in the overall system of the Trademark Act. Moreover, when the person who registered a trademark similar to the existing one has his/hers nullified even after the pre-existing registered trademark has been conclusively invalidated, this results in an unjustified violation of the freedom of occupation

based on property rights-trademark rights and the relevant trademark. It is to be noted that it is possible, pursuant to the Instant Provision, to register a trademark identical with or similar to an existing registered trademark that has been conclusively nullified if one year has elapsed since the date of extinguishment of the existing trademark right, but this results in forcing legitimate trademark holders to repeat useless procedures - reapplication for trademark registration.

D.In conclusion, the Instant Provision hardly serves the legislative purpose of preventing consumers' misunderstanding and confusion, and, without reasonable cause, violates the property rights and occupational freedom of innocent, legitimate trademark holders who registered a trademark identical with or similar to the existing, but nullified trademark.

2. Dissenting Opinion of One Justice

Once the decision to nullify an existing registered trademark is finalized, the trademark registration thereof is retroactively nullified. However, because it is an objective fact that the existing registered trademark was in place until the decision of nullification became final, it is required to put aside the general principle of retroactive effect and allow exceptions in order to prevent consumers' misunderstanding or confusion over who the producer is. In addition, once the retroactive effect of the nullification decision is indefinitely acknowledged as mentioned in the Court Opinion, relational issues in trademark registration may become unstable for a long term and unreasonable circumstances may occur in which the future of the later registered trademark will totally vary by which comes before between the following: at which point the review of whether to register trademarks identical or similar to an existing one takes place, when the decision in an appeal to rejection of registration is handed down, and when the decision to nullify the existing registered trademark is finalized. Therefore, the Provision which, contrary to the principle of the retroactive effect in nullification decisions, permits the pre-existing trademark that was nullified to serve as a valid standard for reviewing whether to authorize registration is reasonable and does not overstep

the boundary of legislative discretion. For this reason, the Provision does not infringe on the petitioner's property rights and the freedom of occupation.