A punitive damages provision for trademark infringement was adopted on October 20, 2020, and a South Korean court recently awarded a claimant punitive damages in a trademark infringement case for the very first time. This ruling is expected to significantly impact brand protection strategies and corporate accountability in the trademark sphere.

Case Background

The plaintiff, owner of the trademarks "" ("imeal" in Korean transliteration) and "" designating organic snack products, accused the defendant of infringing these marks. The defendant held rights to a similar trademark "" ("imeal" in Korean transliteration) designating baby food, tofu sticks, and beverages, products which are similar to the plaintiff's.

The plaintiff initiated legal proceedings by filing an invalidation action against the defendant's trademark and subsequently pursued a lawsuit for trademark infringement. The IP High Court ruled in favor of the plaintiff, invalidating the defendant's trademark based on the similarity between the marks, the well-known status of the plaintiff's marks, and the defendant's bad faith intent. Following this, the trademark infringement lawsuit was referred to mediation, resulting in a settlement agreement that required the defendant to cease using the plaintiff's trademarks.

However, despite the settlement, the plaintiff discovered continued use of its trademarks by the defendant and subsequently filed a separate lawsuit to seek damages.  

First-Instance Decision

In its initial ruling, the first-instance court awarded the plaintiff KRW 500 million in damages but did not impose punitive damages. The decision was based on Article 110 of the Trademark Act: 

Despite the existence of various factors, including damage to brand reputation and duration of infringement, the first-instance court found these insufficient to warrant punitive damages under Article 110(7).

Appeal and Second-Instance Decision

Upon appeal, the IP High Court increased the damages to KRW 600 million. Of this amount, the court identified KRW 100 million as attributable to intentional infringement. This KRW 100 million portion was then doubled to KRW 200 million under Article 110(7), bringing the total damages recognized by the IP High Court to KRW 700 million.
 
The IP High Court's calculation considered several factors, including:

• Continuous product sales and advertising by the defendant from 2018 to 2023
• A significant decline in the plaintiff's product sales
• The diminishing distinctiveness of the plaintiff's marks
• Increased advertising expenditure by the plaintiff
• The defendant's intentional infringement following the invalidation of its registered trademark

Significance of the Ruling

This ruling highlights the evolving landscape of intellectual property law in the country. By applying punitive damages in a trademark infringement case, the court emphasized the importance of safeguarding trademark rights and highlighted the potentially severe consequences of intentional infringement. To navigate this changing legal environment, businesses must exercise more caution in their branding strategies and responses to infringement allegations since the consequence of intentional acts of infringement has significantly increased.