[1] Where an owner of a trademark right or a person who has obtained his/her consent transfers goods bearing a registered trademark in Korea, whether the trademark right on the goods in question is exhaustion (affirmative)

[2] The case holding that in case where the defendant, who is the actual representative of online mobile sales business, was prosecuted for violating the trademark rights of Gap company's trademark right by taking the visibility with "M" brand attached to Gap company's 'M' style, which was granted a non-exclusive license under the condition to use the trademark in case where Eul company, was sold to Eul company as agreed upon at Eul company, in violation of the above agreement, and selling it in online or open market, etc. which was not agreed upon with Eul company, the case holding that the trademark rights of Eul company's goods are so successful as to achieve its objective, and thereby, the trademark rights do not extend to the use, transfer or lending of the goods

[1] Where a trademark right holder or a person who has obtained his/her consent transfers goods bearing a registered trademark in the Republic of Korea, trademark rights on the goods concerned are so advanced as to achieve its purpose, and trademark rights are not effective against the use, transfer, or lending of the goods concerned. On the other hand, since the scope of non-exclusive licenses, such as designated goods, duration, and area, is granted under a non-exclusive license agreement, the act of using a trademark exceeding such scope may be deemed as not having obtained the consent of the trademark right holder. However, the non-exclusive licensee’s act of transferring goods without the consent of the trademark right holder even in cases where the goods are transferred in violation of the incidental conditions under the contract cannot be seen as excluding the principle of exhaustion of the right holder’s right, and the decision should be made on whether the trademark right has been infringed upon by taking into account the details of the contract, whether the trademark owner’s act of indicating the place of goods and the function of quality assurance

[2] The case holding that in case where the defendant, a real representative of online sunset sales company Gap corporation, was prosecuted for infringing Gap company's trademark rights by taking advantage of the visibility with "M" brand attached with non-exclusive license under the condition to use the trademark when selling goods agreed upon Eul corporation, Eul corporation's act of selling goods at discount stores and online shopping malls, etc., in violation of the above agreement, Gap corporation's trademark rights were not infringed upon Eul corporation's trademark rights by being supplied by Eul company and selling goods at online or open markets, etc., the case holding that the court below's decision that the defendant's sale of the defendant's goods was a true product produced by lawfully attaching the trademark upon Gap company's permission, and the distribution of goods in the defendant's Internet shopping mall in violation of the contract to restrict the place of sale was not in violation of Eul's trademark rights's trademark rights' function or quality assurance function, and it is hard to say Eul company's trademark rights' infringement upon Eul company's trademark rights's trademark rights' infringement upon Eul's trademark rights's trademark rights's reputation or quality, etc.

[1] Articles 57 (see current Article 97) and 93 (see current Article 230) of the former Trademark Act (wholly amended by Act No. 1403, Feb. 29, 2016) / [2] Articles 57 (see current Article 97), 66 (1) 2 (see current Article 108 (1) 2), and 93 (see current Article 230) of the former Trademark Act), Article 325 of the Criminal Procedure Act

[1] Supreme Court Decision 2002Do3445 decided Apr. 11, 2003 (Gong2003Sang, 1218)

Defendant

Defendant

Attorney Han Han-ok

Seoul Southern District Court Decision 2017No496 decided August 24, 2018

The judgment below is reversed, and the case is remanded to Seoul Southern District Court Panel Division.

The grounds of appeal are examined.

1. Summary of the facts charged in this case

The Defendant is the actual representative of online sunset sales chain (English trade name omitted). From September 2012 to April 8, 2016, the Defendant infringed the victim’s trademark right by selling the victim’s non-indicted 1 Co., Ltd. (hereinafter “victim Co. 1”) to Nonindicted Co. 2 (hereinafter “Nonindicted Co. 2”) an agreed store with the victim, in a case where the Defendant sells to Nonindicted Co. 2 Co., Ltd. (hereinafter “victim Co. 2”), the trademark right holder, in violation of the above agreement, the visibility of the “M” door ○○○○○○○○ brand on the condition of allowing use of the trademark.

2. Judgment on the exhaustion of trademark rights

A. Where a trademark right holder or a person who has obtained his/her consent transfers goods bearing a registered trademark in the Republic of Korea, trademark rights on the goods concerned are so advanced as to achieve its purpose, and trademark rights are not effective against the use, transfer, or lending of the goods concerned (see Supreme Court Decision 2002Do3445, Apr. 11, 2003). Meanwhile, since the scope of non-exclusive licenses, such as designated goods, duration, and area, are granted under a non-exclusive license agreement, the non-exclusive licensee’s use of the trademark can be deemed as without the consent of the trademark right holder. However, even where the non-exclusive licensee transfers goods in violation of the incidental conditions under a contract, the principle of exhaustion of rights cannot be deemed as excluded. The decision should be made on whether the infringement of trademark rights has been caused by taking into account the details of the contract, whether the goods place display and quality assurance function, which are the main function of the trademark, damaged the trademark trademark, the necessity of protecting consumers who purchased goods, etc. even after the trademark right holder received compensation for sale of goods.

B. Review of the reasoning of the lower judgment and the record reveals the following facts.

1) The victim company is a trademark right holder such as the trademark “(registration number omitted)” and operates the “○○○○○○ (△△△△△△△△△△)” brand.

2) On July 1, 2010, the injured company entered into a trademark use agreement with Nonindicted Company 2 to grant the right to develop, sell, and sell the goods, such as the arms and sprink, designated goods of the above registered trademark, to Nonindicted Company 2 by June 30, 2015. The above agreement states that “Nonindicted Company 2 shall sell the goods at the victim company’s specialty stores, department stores, duty-free shops, etc., as agreed with the injured company, and sell them at a discount store and Internet shopping mall, the injured company must obtain prior consent from the injured company, and shall not sell the goods in the conventional market.”

3) On June 30, 2015, when preparing a written agreement with Nonindicted Company 2 before the termination of the said contract, the victim company agreed to receive trademark fees from Nonindicted Company 2, instead of allowing Nonindicted Company 2 to dispose of remaining stocks by December 31, 2015. From among the existing sales stores and Internet shopping malls designated by the victim company, sales in the victim company’s direct marketing area and six department stores shopping malls were allowed, but a contract was invalidated and a compensation for damages was added.

4) As an operator of (trade name omitted) (English trade name omitted), the Defendant has sold online visibility supplied by Nonindicted Company 2, such as the entry in the facts charged.

C. We examine the above facts and related legal principles.

1) The visibility sold by the Defendant is the so-called authentic goods produced by Nonindicted Company 2 by legally attaching a trademark with the permission of the victim company, which is the owner of the trademark right, and the distribution of goods in the Internet shopping mall of the Defendant in violation of the agreement to restrict the place of sale is difficult to deem that the function of indicating the origin of the trademark

2) In addition, under the trademark use agreement, the right to manufacture and sell visual goods is granted to Nonindicted Company 2. Unlike the conventional markets that completely prohibit sales, sales at discount stores and Internet shopping mallss were possible with the consent of the trademark right right holder and their distribution was not prohibited at source. In fact, in the agreement for the disposal of inventory goods, sales at some Internet shopping mallss, such as direct disposal of the victim company and department stores shopping malls, were allowed.

3) In the instant case, the Defendant’s Internet shopping mall does not seem to have a fundamental difference from other Internet shopping malls permitted to sell, and it is difficult to view that the reputation of the victim company’s trademark or image of the trademark right established by the victim company is damaged solely on the sole basis of the fact that the Internet shopping mall is sold in the Internet shopping mall

4) The injured party company was paid trademark fees from Nonindicted Company 2 in accordance with the trademark use agreement, and Nonindicted Company 2 supplied goods in return for payment from the Defendant. As such, it may be deemed that monetary compensation was made to the trademark right holder upon the sale of goods. While it is difficult to deem that the trademark right holder in this case has a great interest in prohibiting additional distribution, the need for protecting consumers who purchased goods through transactions is recognized.

5) Ultimately, by the supply of goods to the Defendant by Nonindicted Company 2, trademark rights for the pertinent goods are so advanced as to achieve its purpose, and thereby, trademark rights do not extend to the use, transfer, or lease of the pertinent goods.

D. Nevertheless, the lower court determined that Nonindicted Company 2’s act of selling visual visibility to the Defendant in violation of the agreement on the restriction of place of sale with the trademark right holder constitutes trademark infringement, and that there is no room for the Defendant to apply the doctrine of exhaustion of trademark rights. In so determining, the lower court erred by misapprehending the legal doctrine on the exhaustion of trademark rights, thereby adversely affecting the conclusion

3. Judgment on the defendant's intentional act

A. In a criminal trial, the conviction in a criminal trial ought to be based on evidence having probative value, which leads to the judge’s conviction that the facts charged are true beyond a reasonable doubt. In a case where the prosecutor’s conviction is not sufficiently satisfied, even if there is suspicion of guilt, the interest of the defendant should be determined. In this case, the defendant should have been aware that the terms and conditions of a contract between the victim company and Nonindicted Company 2 were breached and the supply of the goods was made in order to ask the defendant for the charge of infringing on trademark rights. In light of the following circumstances revealed by the record, the evidence submitted by the prosecutor alone cannot be deemed as having been proven beyond a reasonable doubt.

1) The Defendant consistently asserted to the effect that he did not know the agreement to restrict the place of sale by denying the infringement of trademark rights, and there is no evidence that Nonindicted Company 2 or the victim company informed the Defendant of the agreement to restrict the place of sale in advance.

2) Although the written complaint of the victim company states that the defendant sent a warning to the defendant on September 1, 2012, the defendant did not receive it, the above written warning does not appear to have violated the contract to restrict the place of sale.

3) Rather, according to the evidence submitted by the Defendant, Nonindicted Co. 2 prepared “○○○○○○○○○○○○○ Babs’ confirmation document” on January 5, 2015, and “○○○○○○○○ ○○ ○○ Babs’ confirmation document” on March 2, 2016, stating that “The products supplied to the Defendant may be regularly distributed as the products manufactured by Nonindicted Co. 2 with the regular license, and shall be compensated for damage in the event of counterfeit products and products violating trademark rights.”

B. Nevertheless, in light of the Defendant’s visual sales business experience and the Defendant’s experience and knowledge as to the trademark right, the lower court convicted the Defendant of the facts charged on the ground that at least dolusent intent as to the instant trademark infringement was recognized. In so doing, the lower court erred by failing to exhaust all necessary deliberations, exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, or by misapprehending the legal doctrine on the intent to commit a crime of violation

4. Conclusion

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Sang-ok (Presiding Justice)