IP Issues In Korea- What Actions To Take To Protect Your IP

KOREAN IP SCANDALS: LACK OF ENFORCEMENT DESPITE THE MECHANISMS 

Lately, Korea has been the subject of several high profile IP related lawsuits.  On March 11, Burberry filed a lawsuit in Korea against underwear maker SBW, claiming SBW copied Burberry’s trademarked checker patterns.  More recently, SanDisk and Toshiba files separate lawsuits against SK Hynix for stealing flash technology.  Though these lawsuits reflect a different aspect of IP, one a trademark case and the others alleging the theft of trade secrets, they also show a disturbing trend of passive IP infringement in Korea.

IP infringement in Korea is nothing new. Kolon was sued by Dupont for trade secret theft as well, which resulted in a $950 Million verdict against Kolon in the U.S.  The verdict has been overturned on appeal and of course, the Apple v Samsung litigation, is perhaps the most famous litigation involving trade dress as it has mushroomed out to involve cases in various jurisdictions.  However, the size and seriousness of passive IP infringement is growing despite Korea’s implementation of a well drafted IP regime.

Though Korean companies are the 5^th largest file of patent applications in the world (number 2 in the US) Korean companies rarely take legal action against infringers, especially domestically.  Despite Korea’s IP laws and numerous governmental agencies that can assist in IP infringement actions, such laws are rarely used domestically.  In the past, Korean companies have refused to aggressively use IP laws to enforce their patent and trademark rights as they wanted to avoid litigation and the perception they were using the law against domestic counterparts. In essence, they did not want to be viewed domestically as taking advantage of IP rights for political or economic gain over fellow Koreans.  Even today, Korean companies, except for a few chaebols, refuse to aggressively exercise IP rights, even though they may have cause to do so.

As Korean companies continue to refuse to take aggressive business or legal action against infringers, especially domestic ones, this has led to the current trend of passive counterfeiting. Korean companies are no longer counterfeiting products as much as they are counterfeiting or copying designs, marketing strategies, trade dress and product environment.  Likewise, though more sensitive to IP violations than in the past, Korea’s failure to proactively protect IP rights has led to a permissive atmosphere among Korean companies when it comes to theft or misuse of a company’s trade secrets.  This is quite evident when considering the lawsuit filed by Toshiba and SanDisk against SK Hynix alleging trade secret theft.  The lawsuits filed in Tokyo District Court and in the Santa Clara Supreme Court in CA, allege a former SanDisk engineer sold NAND flash memory to SK Hynix in 2008.

For foreign companies doing business in Korea or doing business with Korean companies, protecting and enforcing IP rights is of great concern.  It must also be balanced with the business environment, as a foreign brand would be ignored in the Korean domestic market, if a company is perceived as “too aggressive” when enforcing its rights.

Foreign companies, when dealing with IP infringement issues should make use of the 5 main government agencies that protect IP and help enforce IP rights.  They are:

1.  Korea Intellectual Property Office ( KIPO)
2.  Korea National Police Agency
3.  Korea Customs Service ( KCS)
4.  Korea Trade Commission ( KTC)
5.  Ministry of Justice ( MOJ)The agencies, if used properly, can help a number of ways, including (i) investigation of the distribution network, (ii) raids, (iii) blocking of imports,(iv) international trade remedies, and (v) injunctions against counterfeit sales, etc.As litigation is expensive, companies need to consider whether filing civil complaints are in fact worth the time and effort.  KTC action may be less expensive and easier to enforce than litigation.  Therefore, a company needs to consider all alternatives available to it when enforcing IP rights.As companies continue to do business in Korea, they need to be aware of the very real danger of IP infringement and theft that could take place.  They must also realize that many Korean companies are very lackadaisical when enforcing third party IP rights and sometimes turn a blind eye to IP infringement internally.  Considering the danger of IP infringement, companies should take preventive action to prevent loss or misuse of IP including:

1.  Creation of a IP Brand Protection Team that can implement a anti-counterfeiting plan and strategy;
2.  Create a counterfeiting detection system;
3.  Control all aspects of the distribution network. Track the product through distribution to confirm where the products came from;
4.  Monitor sales outlets and online shopping malls;
5.  Do extensive due diligence on potential buyers and sellers to confirm they do not sell counterfeits;
6.  Do extensive due diligence on potential dealers and distributors to confirm they do not sell counterfeit products or misuse IP.
7.  Train all Korean employees on IP infringement. The more the Korean employees understand what IP consists of the more serious they will be about protecting it; and
8.  Make certain your HR department screens hires from competitors to prevent unauthorized disclosure of trade secrets.