[1] The purport of Article 23(1) of the Commercial Act and the standard for determining whether a trade name constitutes “a trade name that may mislead another person as a business”

[2] Whether an act of using a business mark containing a company group mark constitutes an unfair competition act under Article 2 subparagraph 1 (b) of the Unfair Competition Prevention and Trade Secret Protection Act, in a case where a company group with an economic and systematic relationship is separated, solely by using a business mark among affiliates (negative in principle)

[1] Article 23(1) of the Commercial Act provides, “No person shall use a trade name that may be mistaken for the business of another person for unjust purposes.” The purport of the above provision is to prevent public mistake and confusion in the general trade market, to protect trust in this regard, and to protect the interests of mutual right holders to use a trade name distinct from the trade name of another person. In determining whether a trade name constitutes “a trade name that may be mistaken for the business of another person” in light of the legislative intent as seen above, when determining whether a trade name constitutes “a trade name that may be mistaken for the business of another person,” the two trade names shall be compared and observed by comparing and observing each other in order to determine whether a trade name constitutes “a trade name that may be mistaken for the business of another person” shall be considered as closely related to each other in terms of the nature, content, business method, consumers’ floor

In addition, "illegal purpose" as referred to in the above provision refers to an unlawful intent by a general person to make another person misunderstand the business of another person indicated in his/her name as his/her trade name and to make another person misunderstand his/her business, or to inflict losses on another person. Whether an unlawful purpose exists shall be determined by comprehensively taking into account various circumstances, such as the merchant's reputation or credit, type, size, and method of business, and the process of mutual use.

[2] Article 2 subparagraph 1 (b) of the Unfair Competition Prevention and Trade Secret Protection Act provides that "an act of causing confusion with another person's business facilities or activities by using things identical or similar to another person's name, trade name, emblem, and other marks widely known in the Republic of Korea, in order to prevent an act of unfair competition that unfairly gains by taking advantage of another person's credit or reputation, which was formed by taking considerable effort and cost into consideration."

In light of the legislative intent, contents, etc. of the above provision, in a case where an enterprise group having economic and organizational relations is separated, certain affiliate companies play a central role in adopting and using the business group marks, and thus have succeeded to the business group marks to ordinary consumers, insofar as it is not recognized to have succeeded to the business group marks, it is difficult to deem that an act of using a business mark containing the business group marks between affiliate companies of the business group and others has committed an unfair competition act that unfairly gains profits by taking advantage of another person’s credit or reputation.

[1] Article 23 (1) of the Commercial Act / [2] Article 2 subparagraph 1 (b) of the Unfair Competition Prevention and Trade Secret Protection Act

[1] Supreme Court Decision 2001Da73879 decided Feb. 26, 2002 (Gong2002Sang, 805)

Daesung Holdings Co., Ltd. (Attorneys Son Ji-yol et al., Counsel for the defendant-appellant)

Daesung-dong Co., Ltd. (Law Firm Sejong, Attorneys Kang Jae-sop et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2012Na80806 decided September 5, 2013

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the grounds of appeal Nos. 1 through 3

Article 23(1) of the Commercial Act provides, “No person shall use a trade name that may be mistaken for the business of another person for an unlawful purpose.” The purport of the above provision is to prevent public mistake and confusion in the general trading market, to protect trust in this regard, and to protect the interests of mutual right holders to use a trade name distinct from the trade name of another person. In determining whether a trade name constitutes “a trade name that may be mistaken for the business of another person” in light of the legislative intent above, in comparison and observation of both trade names in order to determine whether a trade name constitutes “a trade name that may be mistaken for the business of another person,” the following should be comprehensively taken into account: (a) whether a trade name constitutes a trade name closely related to one another in terms of the nature, content, business method, customer floor, etc. of each business, in which the general public considers that the two business entities are related to one another; or (b) whether the trade name of another person is widely known, thereby obtaining a firm trust from the general public due to its reputation (see

In addition, "illegal purpose" as referred to in the above provision refers to an unlawful intent in which a person misleads the general public as to his/her own business by using a name in his/her own trade name to make unjust profits or to inflict losses on another person, such as where he/she intends to use his/her own business as a business of another person indicated in his/her name. Whether there is an unlawful purpose shall be determined by comprehensively taking into account various circumstances, such as the merchant's reputation or credit, type, size

According to the reasoning of the lower judgment, the lower court determined that (1) the Defendant’s trade name “DAES UNHDINGS CO.,” and “DAES HOLDCO.,” prior to the change, constitutes a trade name that could be mistaken for the Plaintiff’s business, since the Plaintiff and the Defendant’s main business purpose are the same as the prop business, and thus, the Defendant’s trade name prior to the change constitutes a trade name that could be mistaken for the Plaintiff’s business, and (2) even if the Defendant was sufficiently aware that it could cause mistake and confusion with the Plaintiff’s trade name, the lower court recognized the illegal purpose on the grounds of the circumstances, etc. using the Defendant’s trade name prior to the change.

Examining the reasoning of the lower judgment in light of the aforementioned legal principles and records, the said determination by the lower court is justifiable. In so doing, it did not err by misapprehending the legal doctrine as to Article 23 of the Commercial Act, exceeding the bounds of the principle of free evaluation of evidence inconsistent with logical and empirical rules

2. As to the grounds of appeal Nos. 4 and 5

Article 2 subparag. 1 (b) of the Unfair Competition Prevention and Trade Secret Protection Act (hereinafter “Unfair Competition Prevention Act”) provides for “an act of causing confusion with another person’s business facilities or activities by using things identical or similar to another person’s name, trade name, emblem, and other marks indicating another person’s business, widely known in the Republic of Korea, in order to prevent an unfair competition act of obtaining unjust profits by taking advantage of another person’s credit or reputation formed by taking considerable effort and costs.”

In light of the legislative intent, contents, etc. of the above provision, in a case where an enterprise group having economic and organizational relations is separated, certain affiliate companies play a central role in adopting and using the said enterprise group marks, and thus, are perceived as the subject of credit arising from the said enterprise group marks to ordinary consumers, and as long as it is not recognized that they succeeded to the said enterprise group marks, it is difficult to deem that the act of using a business mark containing the said business group marks between the affiliate companies of the pertinent enterprise group and thereby making unjust profits by taking advantage of the other party’s credit or reputation is established.

According to the reasoning of the judgment below, the court below determined that the claim of this case did not constitute abuse of rights on the ground that the Plaintiff’s use of a trade name including the mark “largeness” cannot be seen as a mark referring only to Defendant’s affiliate business mark, or that the Plaintiff’s use of a trade name including the mark “largeity” cannot be deemed as an act of confusion with the business entity under Article 2(1) Item (b) of the Unfair Competition Prevention Act.

In light of the aforementioned legal principles and records, the above determination by the court below is just and acceptable, and there were no errors by misapprehending the legal principles on unfair competition and abuse of rights, exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, or failing to exhaust all necessary deliberations.

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee In-bok (Presiding Justice)