República de Corea

PATENT COURT OF KOREA

TWENTY-FIRST DIVISION

DECISION

Case No.: 2016Na1691
                 Petition for Injunction against Trademark Infringement

Plaintiff and Appellant/Appellee: A
                                                         United States

Defendants and Appellees/Appellants: 1. C
                                                                  2. D
                                                                  3. E

District Court’s Decision: F District Court Decision, 2015GaHap3760, decided August 24, 2016

Date of Closing Argument: March 14, 2017

Decision Date: June 29, 2017

ORDER

1. The District Court’s Decision is hereby amended as follows:

A. The Defendants:

1) shall not use any mark listed in Appendix 2 for their business;

2) shall not produce, use, sell, distribute, import, export, or display or offer to sell any signs, banners, garage doors, direction boards, bedding supplies, shampoo/conditioner/lotion containers, pouch bags for toiletries, electric kettles, or promotional/advertising materials indicating any mark listed in Appendix 2;

3) shall destruct any signs, bedding supplies, slippers, gowns, shampoo/conditioner/lotion containers, props for cosmetic products, towels, pouch bags for toiletries, electric kettles, any other motel room amenities, and promotional/advertising materials listed in Appendix 3 with indication of any mark listed in Appendix 2 being used, stored, or displayed at the Defendants’ offices, factories, warehouses, vehicles, and motels.

B. Defendants C and D:

1) shall delete and remove each mark listed in Appendix 2 from the exterior walls, garage doors, bathroom doors within the rooms, and internet website of the three-story motel buildings located in H of G-gu, F City;

2) shall jointly pay KRW 50 million, of which amount the following shall be compensated as well:

A) with respect to KRW 30 million, the amount calculated at an annual rate of 5% for a period from July 10, 2015 to August 24, 2016, and at an annual rate of 15% for a period starting from the next day to the date of full repayment;

B) with respect to KRW 20 million, the amount calculated at an annual rate of 5% for a period from July 10, 2015 to June 29, 2017, and at an annual rate of 15% for a period starting from the next day to the date of full repayment.

C. Defendant E:

1) shall delete and remove each mark listed in Appendix 2 from the exterior walls, garage doors, bathroom doors within the rooms of such motels of the three-story motel building located in K and four lots of land in J City;

2) shall pay KRW 40 million, of which amount the following shall be compensated as well:

A) with respect to KRW 30 million, the amount calculated at an annual rate of 5% for a period from July 10, 2015, to August 24, 2016, and at an annual rate of 15% for a period starting from the next day to the date of full repayment;

B) with respect to KRW 10 million, the amount calculated at an annual rate of 5% for a period from July 10, 2015, to June 29, 2017, and at an annual rate of 15% for a period starting from the next day to the date of full repayment.

D. The remaining part of Plaintiff’s petition against the Defendants is dismissed.

2. One-fifth of the total litigation cost shall be borne by the Plaintiff, and the remainder by the Defendants.

3. Paragraph 1 above may be provisionally executed.

PLAINTIFF’S DEMAND AND APPELANT’S DEMAND

Ⅰ. Plaintiff’s Demand

In addition to Paragraph 1. A in Order above:

1. The Defendants shall not use any mark listed in Appendix 1 for their business.

2. The Defendants:

A. shall delete and remove each mark listed in Appendix 2 from the exterior walls, garage doors, bathroom doors within the rooms, and internet website of the motels operated by the Defendants;

B. shall deliver, to the bailiff delegated by the Plaintiff, the finished products and half-finished products, wrapping paper, packing containers, and promotional/advertising materials listed in Appendix 3, onto which any mark or sign listed in Appendix 2 is attached or indicated, which are stored in the Defendants’ offices, factories, warehouses, sales offices, and stores;

C. In cases above, the bailiff shall give a public notice of the purport of such storage in an appropriate manner.

3. Defendants C and D shall jointly pay the Plaintiff KRW 150 million as well as an amount calculated at an annual rate of 20% for a period from July 10, 2015 to September 30, 2015, and at an annual rate of 15% for a period starting from the next day to the date of full repayment.

4. Defendant E shall pay the Plaintiff KRW 150 million as well as an amount calculated at an annual rate of 20% for a period from July 10, 2015, to September 30, 2015, and at an annual rate of 15% for a period starting from the next day to the date of full repayment.

5. Defendant C shall undergo procedures to transfer registration of the domain name “I” registered on February 10, 2015, with “OUTBACKMT” as the registrant’s name, to L, a domain registration agency accredited by the Internet Corporation for Assigned Names and Numbers (ICANN).

Ⅱ. Appellant’s Demand

1. The Plaintiff

The portion of the District Court’s decision found in favor of the Defendants regarding additional payment as described below shall be vacated:

Defendants C and D shall jointly pay the Plaintiff KRW 120 million and an amount calculated an annual rate of 20% for a period from July 10, 2015 to September 30, 2015, and at an annual rate of 15% for a period starting from the next day to the date of full repayment; and Defendant E shall pay KRW 120 million and an amount calculated at an annual rate of 20% for a period from July 10, 2015 to September 30, 2015, and at an annual rate of 15% for a period starting from the next day to the date of full repayment.

2. The Defendants

The portion of the District Court’s decision found in favor of the Plaintiff shall be vacated, and the Plaintiff’s claim against the Defendants corresponding to the portion so vacated shall be dismissed.

OPINION

1. The Scope of Trial by This Court

A. The Plaintiff’s Demands against the Defendants

In the trial at the District Court, the Plaintiff demanded against the Defendants: (1) prohibition of use of any mark listed in Appendix 1; (2) prohibition of use of any mark listed in Appendix 2; (3) prohibition of production, etc. of signs, etc. indicating any mark listed in Appendix 2; (4) deletion, etc. of any mark listed in Appendix 2; (5) delegation of authority to the bailiff and public notice regarding finished products, etc. listed in Appendix 3, onto which any mark listed in Appendix 2 is attached or indicated; (6) destruction of direction boards, etc. listed in Appendix 3, onto which any mark listed in Appendix 2 is indicated; and (7) damages; and demanded against Defendant C, (8) registration of domain transfer (hereinafter to be indicated as in “Claim (1)”).

B. Rulings in the District Court’s Decision

The District Court dismissed the Plaintiff’s claims against the Defendants for prohibition of use of any mark listed in Appendix 1 for their business (Claim (1)); granted in its entirety each of the Plaintiff’s claims against the Defendants for prohibition of use of any mark listed in Appendix 2 for their business (Claim (2)), prohibition of production, etc. of signs, etc., onto which any mark listed in Appendix 2 is attached or indicated (Claim (3)), deletion, etc. of any mark listed in Appendix 2 (Claim (4)), and destruction of direction boards, etc. listed in Appendix 3, onto which any mark listed in Appendix 2 is indicated (Claim (6)); and partially granted the Plaintiff’s claim against the Defendants for damages (Claim (7)). In addition, the District Court denied each of the Plaintiff’s claims against the Defendants for delegation of authority to the bailiff and public notice regarding finished products, etc. listed in Appendix 3, onto which any mark listed in Appendix 2 is attached or indicated (Claim (5)) and the Plaintiff’s demand against Defendant C for registration of domain transfer (Claim (8)).

C. Appeal by the Plaintiff and the Defendants and the Scope of Trial by This Court

Regarding the above, the Plaintiff appealed against the portion partially denied out of the claims for damages and demanded additional payment in relation thereto; and the Defendants appealed against the entire portion found in favor of the Plaintiff.

Thus, the dismissed portion and the portion found in favor of the Defendants become final; and the scope of trial by this Court shall be limited to the Plaintiff’s claims against the Defendants for prohibition of use of any mark listed in Appendix 2 for their business (Claim (2)), prohibition of production, etc. of signs, etc., onto which any mark listed in Appendix 2 is attached or indicated (Claim (3)), deletion, etc. of any mark listed in Appendix 2 (Claim (4)), destruction of direction boards, etc. listed in Appendix 3, onto which any mark listed in Appendix 2 is indicated (Claim (6)), and damages (Claim (7)).

2. Background

A. The Plaintiff’s Status and Registration of the Service Marks

1) The Plaintiff is a corporation established in 1988 in the United States and is currently operating family restaurants in over 20 countries around the world including the Republic of Korea, with the trade name of “Outback” or “Outback Steakhouse.”

2) For the marks used for its family restaurant business in Korea, the Plaintiff filed an application for each service mark and completed registration of those service marks, as described in the table below (hereinafter referred to as Business Mark 1, 2, and 3, in the following order, and collectively “Business Marks”).

B. The Defendants’ Use of the Marks

1) Defendants C and D, working in partnership, have operated on the land O and three-story building in N-myeon, M City since 2011 and on the land H and three-story building in G-gu, F City since 2014, and Defendant E has operated on the land K and four other lots of land and three-story building in J City since 2011, unmanned accommodations with rooms for hire, each of which under the trade name “Outback” or “Outback Unmanned Motel.” The Defendants have used each mark listed in Appendix 2―“아웃백,” “OUTBACK,” and “” (“Infringing Marks”)—on the external facilities of the above accommodations such as store signs and sign boards, and internal facilities and amenities such as direction boards, price table, bedding supplies, and amenities.

2) Defendants C and D have opened and operated an Internet website in relation to the business of the unmanned accommodation in F, and this website indicates “” among the Infringing Marks.

3) Defendants C and D have sold the land O and the three-story accommodation located in N-myeon, M City, to P in around March 2016 and completed registration of ownership transfer.

[Factual Basis] Undisputed facts; statements and images in Plaintiff’s Exhibits 1 through 3, 15 through 17, 26, 27, 41, and 43 and in Defendant’s Exhibits 11 and 13 (including each branch number); the reply from provision of tax information to North Jeonju Tax Office and Iksan Tax Office at District Court level; and the purport of the overall argument.

3. Summary of the Plaintiff’s Arguments

A. Infringement of Service Mark Rights

The Defendants infringed the Plaintiff’s service mark rights by using the Infringing Marks similar to the Business Marks, which are the Plaintiff’s registered service marks, for the services identical or similar to the designated services.

B. Confusion in Business Entities

Using the Infringing Marks similar to the Business Marks widely known within Korea as the Plaintiff’s business marks, the Defendants caused confusion between the Defendants’ business and the Plaintiff’s business facilities or activities, such act of the Defendants constituting an act of unfair competition stipulated in subparagraph 1(b) of Article 2 of the Unfair Competition Prevention and Trade Secret Protection Act (“UCPA”).

C. Damage to Distinctiveness and Reputation

The Defendants damaged the distinctiveness and reputation of the Business Marks by using the Infringing Marks similar to the Business Marks widely known within Korea as the Plaintiff’s business marks, for decadent love hotels, such act of the Defendants constituting an act of unfair competition stipulated in subparagraph 1(c) of Article 2 of the UCPA.

4. Regarding Infringement of Service Mark Rights

A. Similarity of the Services

This Court first examined whether the designated services for the Business Marks―cafeteria services, resting areas, restaurants, etc. are identical or similar to the unmanned accommodation, which is the service using the Infringing Marks.
Similarity of designated services must be determined based on the perception of general consumer in light of the trade practice such as the nature and content of services provided, means of provision, service providers, and scope of consumers (Supreme Court Decision, 2003Hu1192, decided May 12, 2005; Supreme Court Decision, 2006Hu3298, decided June 14, 2007).
In that the designated services for the Business Marks provide some of the necessities of life to customers, the two types of services may be deemed, to a certain extent, to share similar nature and content of services and consumers.
However, (1) the two types of services have different means of providing services (face-to-face service and unmanned service) and specific nature and content; (2) the two are distinguished in that one has persons who desire to eat food as its consumers, while the other has persons who look for lodging; and (3) based only on the evidence submitted by the Plaintiff, such as Plaintiff’s Exhibits 24-1 through 5, 25, and 44, it is difficult to conclude that provision of both services by the identical businesses is general practice of transaction or that general consumers usually believe so.
Thus, the designated services for the Business Marks and the services using the Infringing Marks cannot be deemed identical to each other.

B. Discussion

Therefore, it cannot be concluded that the Defendants infringed the Plaintiff’s registered service mark rights and there is no need to further examine the rest of the requirements for infringement of service mark rights.

5. Regarding Confusion of Business Entities

A. Relevant Law

Subparagraph 1(b) of Article 2 of the UCPA stipulates that “an act of causing confusion with another person’s commercial facilities or activities by using marks identical or similar to another person’s name, trade name, or emblem, or any other mark indicating another person’s business, which is widely known in the Republic of Korea” is one of the acts of unfair competition. Here, “mark indicating another person’s business, which is widely known in the Republic of Korea” refers to the marks by which purchasers or consumers widely perceive a specific business distinguishable from another business across Korea or within a certain area in Korea. With respect to whether any mark indicates another business widely known in Korea, a prima facie case is established based on the circumstances of transaction, the period, methods, modality and frequency of use, and scope of transaction, as well as whether the mark is widely known objectively in consideration of socially accepted perception. Similarity of business marks must be decided through overall comparison, objective comparison, and comparison by recollection of two business marks used for the same type of business in terms of their appearance, sound, and meaning to examine whether general consumers or purchasers in a specific circumstance of transaction are likely to misconceive or confuse the source of business. Acts of causing confusion with another person’s commercial facilities or activities include not only an act of confusing that the business marks themselves are identical, but also an act of using a mark identical or similar to another person’s business mark widely known in Korea and thereby misleading general consumers or purchasers into wrongfully believing that the business of the relevant business mark is closely related to the user of the identical or similar mark in terms of capital, organization, etc. Whether such acts constitute consumer confusion with another person’s business marks must be determined in comprehensive consideration of the business mark’s being well-known, level of distinctiveness, degree of similarity of marks, actual practice of business, existence of business competition due to overlapping customers, and malice (purpose of use) of imitators (Supreme Court Decision, 2011Da9822 decided December 22, 2011).

B. Whether the Business Marks are Business Marks Widely Recognized by consumers in Korea

1) Established Facts

Each of the following facts is either undisputed between the parties, or can be admitted in comprehensive consideration of the purport of each statement and image in Plaintiff’s Exhibits 1, 4, 6 through 14, 19, 28, and 30 through 32 (including each branch number).

A) The Plaintiff is a corporation established in 1988 in the United States and is currently operating approximately 1,200 family restaurants in over 20 countries around the world including the Republic of Korea, with the trade name of “Outback” or “Outback Steakhouse.” The Plaintiff opened the first Outback Steakhouse restaurant in Korea in 1997 and currently operates about 80 such restaurants across the nation.

B) While operating the family restaurants as described above, the Plaintiff has mainly used Business Mark 3 () or “” which is the same mark in a different color (hereinafter “Business Mark 4” and collectively “Business Marks” including Business Mark 4) for the restaurants’ signs, menus, price tables, packaging, wet tissue, and receipts. In the marketplace, the terms such as “아웃백 스테이크하우스,” “아웃백” and “Outback” have been used to refer to the Plaintiff or the restaurants operated by the Plaintiff.

C) The Plaintiff ran television commercials and newspaper advertisement in which celebrities such as Q, R, S, and T, and also placed advertisement using social network services including Facebook, and the advertising expenditure amounts to approximately KRW 19 billion from 2013 to the first half of 2015.

D) Operating about 80 restaurants within Korea, the Plaintiff’s revenues between 2010 and 2014 were as follows:

(Unit: USD)

E) The Plaintiff’s “Outback Steakhouse” was selected as the best family restaurant for ten consecutive years from 2005 to 2014 in the National Brand Competitive Index (NBCI) surveyed by the Korea Productivity Center. In 2014, Outback Steakhouse won higher consumer satisfaction than any other family restaurants in the online survey conducted by the Korea Consumer Agency. In 2015, it was also ranked the first in the consumer preferences of family restaurants surveyed by The Korean Economic Daily.

2) Specific Conclusion

Considering within the period of the Plaintiff’s domestic operation; period, methods, and modality of use of the Business Marks; advertisements; revenues; and level of awareness within the market as discussed in above Paragraph (1), when taking into account the fact that consumers of family restaurants are not limited to any specific age group or gender and that the Plaintiff’s restaurants are evenly distributed across the nation, the Business Marks are widely known in Korea as the Service Marks of the Plaintiff’s (although the Defendants argued that “아웃백” or “Outback” is a significant geographical designation and therefore has no distinctiveness, the statements in Defendant’s Exhibits 1 through 5 are not sufficient to support that “아웃백” or “Outback” constitutes a conspicuous geographical designation, this is more so based on the fact that the above-described mark has reached to the level of well-knownness as discussed above; the Defendant’s argument above is therefore not accepted).

C. Specific Conclusion on Confusion in Business Entities

1) Being Well-Known, Level of Distinctiveness, Degree of Similarity of Marks, and Malice of Imitators

As discussed in Paragraph B above, the Business Marks are well- known and have strong distinctiveness.
In addition, since the Infringing Marks are identical to the Business Marks in terms of sound and meaning, or the essential part “OUTBACK” is identical in terms of sound and meaning, has the same designation and concept, they are identical or similar to the Business Marks. Given that the similarity between the two marks, malice of the Defendants as imitators can be deduced.

2) However, considering only with the Plaintiff’s evidence such as Plaintiff’s Exhibits 24-1 through 5, 25, and 44, it is difficult to conclude that the Plaintiff’s family restaurant business and the Defendant’s unmanned accommodation business being serviced by the identical business entities is general practice of transaction or that general consumers usually think that way, evidence submitted by the Plaintiff is not sufficient to support that any business operating family restaurants often tends to diversify its business to unmanned accommodation service. In this respect, it cannot be accepted that the two services are in a relationship of business competition due to overlapping customers, etc.
In addition, in comparison to the Plaintiff’s business scale, the Defendants’ business scale is very small [the former being much more than 1,000 times larger than the latter as of 2013 (Plaintiff’s Exhibit 10: reply from provision of tax information to North Jeonju Tax Office and Iksan Tax Office at District Court level)].
As discussed above, the possibility of business competition due to overlapping customers remains extremely low; the Plaintiff’s business scale is incomparably larger than that of the Defendants’; with over 80 restaurants across the nation, the Plaintiff has maintained reputation and credibility and retained favorable evaluation from consumers as “family-centered and nature-friendly family restaurant” through advertisement featuring celebrities and activities of social contribution (Plaintiff’s Exhibits 36 through 40). Based on the foregoing, it is highly unlikely for general consumers or purchasers to misperceive that the Plaintiff directly operates unmanned accommodations, which have negative image, or such facilities are operated by any individual or corporation closely related to the Plaintiff in terms of capital, organization, etc. (as discussed in Paragraph 6. B below, the Defendants’ act of using the Business Marks constitutes damage to the favorable image and value held by the Plaintiff’s Business Marks; since the rationale that the business identical to the Plaintiff or any individual or corporation closely related to the Plaintiff in terms of capital, organization, etc. engages in an act of damaging the favorable image and value held by the Business Marks goes against the rule of thumb, it is extremely unlikely that general consumers or purchasers would be led to mistaking one for the other).

3) Summary

Based on the foregoing, notwithstanding the business marks’ being well-known, strong distinctiveness, the marks’ identicalness and similarity, and imitators’ malice, they cannot be deemed to cause general consumers or purchasers to misconceive that a close relationship in terms of capital, organization, etc. exists between the Plaintiff, which is the business using the Business Marks, and the Defendants, which are the users of the Infringing Marks.

6. Regarding Damage to Distinctiveness and Reputation

A. Relevant Law

Subparagraph 1(c) of Article 2 of the UCPA stipulates that “in addition to the act of causing confusion provided for in item (a) or (b), an act of doing damage to distinctiveness or reputation attached to another person’s mark by using the mark identical or similar to another person’s name, trade name, trademark, or container or package of goods, or any other mark indicating another person’s goods or business, which is widely known in the Republic of Korea, or by selling, distributing, importing, or exporting goods bearing such marks, without good cause prescribed by Presidential Decree, such as the purpose of noncommercial use” is one of the acts of unfair competition. In consideration of the purport and process of legislation of such provisions, the expression “widely known in the Republic of Korea” should be interpreted as the level of famousness of being widely known to most of the general public in addition to relevant purchasers, going beyond the level of famousness of merely being known to purchasers or consumers across Korea or within a certain area in Korea, and whether being widely known within Korea can be determined based on the period, methods, modality and frequency of use; scope of business; actual practice of such business; and whether it is widely known objectively in terms of socially accepted ideas. Damage to distinctiveness refers to damage to a specific mark’s function as a source identifier as a product mark or business mark (Supreme Court Decision, 2002Da13782, decided May 14, 2004), and damage to reputation refers to an act of using a specific mark that has reached the level of famousness for any service with negative image and thereby damaging the favorable image and value of such mark, it is not necessarily required that such business mark be used for any service of the same or similar type or in competition to damage the distinctiveness or reputation of a mark that has reached the level of famousness.

B. Discussion

1) Whether the Business Marks are Famous

As discussed in Paragraph 5. B above, the Business Marks constitute the famous business marks of the Plaintiff.

2) Identicalness and Similarity of Business Marks

Since the Infringing Marks are identical to the Business Marks in terms of sound and meaning, or the essential part which is the “OUTBACK” part is identical in terms of sound and meaning, , they are identical or similar to the Business Marks.

3) Damage to Distinctiveness and Reputation of the Business Marks

Based on the admitted facts discussed in Paragraph 5. B above, each statement in Plaintiff’s Exhibits 20-1 through 5 and 36 through 40, and the purport of the overall argument, the following circumstances are acknowledged: (1) The Plaintiff has obtained nationwide distinctiveness through advertisement, etc. by creating the Business Marks and consistently using them at its restaurants across the nation; (2) The Plaintiff has maintained the reputation and credibility of family-centered and nature-friendly family restaurants based on restaurant interior, website, advertisement featuring celebrities, and activities of social contribution (Plaintiff’s Exhibits 36 through 40); but (3) the Defendants used the Business Marks in the course of operating unmanned accommodations attached with negative image of being used as love hotels―in particular, the Defendants used a mark highly similar to Business Mark 4 (), which is the Plaintiff’s representative brand, by modifying the mountain-shaped figure on the top of Business Mark 4 into an explicit shape of a naked women lying on her side (). Based on the foregoing facts, it is concluded that the Defendants used the famous Business Marks of the Plaintiff for a service with negative image and thereby damaged the favorable image and value of the mark and also damaged the function as a source identifier of the famous Business Marks.

4) Summary

Given the foregoing examination, the Defendants’ act of using the Business Marks amounts to damage to distinctiveness and reputation stipulated in Subparagraph 1(c) of Article 2 of the UCPA.
In this regard, the Plaintiff is entitled to a right to request prohibition under Article 4 of the UCPA (Paragraph C below) and a right to compensate damages under Article 5 of the UCPA (Paragraph D below).

C. Duty to Prohibit and Destroy

1) Portions Granted

As discussed above, the Defendants’ act of using the Infringing Marks in the course of operating unmanned accommodations constitutes an act of unfair competition involving damage to distinctiveness and reputation. In this respect, in accordance with Article 4 of the UCPA, (1) the Defendants shall not use the Infringing Marks for their business; (2) the Defendants shall not produce, use, sell, distribute, import, export, or display or offer to sell any signs, banners, garage doors, direction boards, bedding supplies, shampoo/conditioner/lotion containers, pouch bags for toiletries, electric kettles, or promotional/ advertising materials indicating the Infringing Marks; (3) Defendants C and D shall delete or remove the Infringing Marks from the exterior walls, garage doors, bathroom doors within the rooms, and internet website of the three-story motel buildings operated by the Defendants above located in D of G-gu, F City,; and Defendant E shall delete or remove the Infringing Marks from the exterior walls, garage doors, and bathroom doors within the rooms of the three-story motel buildings operated by Defendant E located in K and four lots of land in J City,; and (4) the Defendants shall have a liability to destruct the infringing objects indicating the Infringing Marks being used, stored, or displayed at the Defendants’ offices, factories, warehouses, vehicles, and motels (although the Plaintiff also filed a claim against “other places similar thereto,” this will be deemed a result of mistake or typo of the Plaintiff’s demand because the claims above did not specify any particular place).

2) Portions Denied

Whether to accept a request for prohibition under Article 4 of the UCPA shall be decided as at the date of closing argument in the proceedings at the trial court (Supreme Court Decision, 2006Da22722, decided November 13, 2008; Supreme Court Decision, 2011Da97065, decided June 27, 2013).
However, given that Defendants C and D sold to a third party the “three-story accommodation in the land O located in N-myeon, M City” they had operated before the closing argument, evidence submitted by the Plaintiff is not sufficient to conclude that Defendants C and D were operating the accommodation above located in M City as at the date of closing argument. In this respect, out of the demand against Defendants C and D, the Plaintiff’s demand for deletion, etc. of the Infringing Marks related to the accommodation above cannot be accepted because the Plaintiff demanded destruction and removal of the objects do not involve an act of unfair competition by the Defendants above as at the date of closing argument.

D. Duty to Compensate for Damages

1) Plaintiff’s Argument

Pursuant to Article 14-2(2) and (5) of the UCPA, the Defendants are liable to reimburse any damage incurred by the Plaintiff due to damage to distinctiveness and reputation (= loss equivalent to the Defendants’ business interest + loss resulting from damaged reputation and credibility).
Defendants C and D shall be liable to jointly pay KRW 150 million and damages for delay therefor to the Plaintiff, as demanded by the Plaintiff, with respect to KRW 174,439,285 as a loss equivalent to the business interest (Article 14-2(2) of the UCPA) and KRW 2.3 billion as a loss resulting from damaged reputation and credibility (Article 14-2(5) of the UCPA).
Defendant E shall be liable to pay KRW 150 million and damages for delay therefor to the Plaintiff, as demanded by the Plaintiff, with respect to KRW 159,540,762 as a loss equivalent to the business interest (Article 14-2(2) of the UCPA) and KRW 2.3 billion as a loss resulting from damaged reputation and credibility (Article 14-2(5) of the UCPA).

2) Claim for Compensation of Damages Equivalent to Business Interest

A) Purport of the Plaintiff’s Argument

The Plaintiff’s argument that the Defendants incurred the Plaintiff a loss equivalent to the “business interest of the Defendants” due to the Defendants’ act of damaging distinctiveness and reputation appears to purport that the Plaintiff incurred a loss due to a lost profit equivalent to the amount of profits above.

B) Relevant Law

Article 14-2(5) of the UCPA, which serves as a supplementation to Article 14-2(2), are intended to relieve burden of proof of the infringed party in terms of business loss equivalent to a lost profit in a claim for damages due to unfair competition, not to presume business loss equivalent to a lost profit. In this context, in order for a person who claims damages to be governed by the subject provision, he needs to actually make argument for and prove any business loss incurred equivalent to a lost profit. However, given the purport of the abovementioned provisions, it shall be deemed that an occurrence of any loss described above can be sufficiently argued and proved through the existence of likelihood or probability of loss, and thus, as long as a person claiming for damages proves that he engages in the same business assumed by the infringer, occurrence of business loss equivalent to a lost profit resulting from an act of unfair competition can be presumed de facto, except in extenuating circumstances (Supreme Court Decision, 2006Da22722, decided November 13, 2008; Supreme Court Decision, 2007Da22514, 22521 decided October 29, 2009; Supreme Court Decision, 2013Da45037, decided October 29, 2015).

C) Specific Conclusion

Since evidence submitted by the Plaintiff is not sufficient to conclude that the Defendants engage in the same type of business assumed by the Plaintiff, the legal provisions above, which presumes business loss equivalent to a lost profit when engagement in the same type of business is proved, is not applicable.
In addition, as discussed in Paragraph 5. C. (2) above, the Plaintiff’s family restaurant service and the Defendants’ unmanned accommodation service cannot be deemed to be in a competitive relationship due to overlapping customers. Given such facts, evidence submitted by the Plaintiff such as Plaintiff’s Exhibits 34 and 35 is not sufficient to conclude that the Defendant’s act of damaging distinctiveness and reputation has any likelihood or probability of causing a lost profit to the Plaintiff, and there is no evidence to otherwise prove the likelihood or probability of any business loss equivalent to a lost profit.

D) Summary

Thus, the claim for damages equivalent to business interest of the Defendants is without merit, without the need for further analysis.

3) Claim for Compensation of Damages from Intangible Loss

A) Relevant Law

Article 751(1) of the Civil Act stipulates the liability for compensation of damage to non-property caused by an illegal act, and damage to non-property which is not limited to mental anguish but includes intangible loss that cannot be calculated in quantity but can be assessed monetarily based on socially accepted ideas. In this respect, a person who damaged a corporation’s honor or credibility is liable to pay such corporation damages of non-property loss (Supreme Court Decision, 2003Da33868, decided August 16, 2004; Supreme Court Decision, 2005Da37710, decided November 10, 2005). In addition, any intangible loss caused by damaged distinctiveness and reputation as stipulated in the UCPA is a kind of damages under Article 751(1) of the Civil Act, and shall be considered to be included in “the damage to business interest in an act of unfair competition” under Article 5 of the UCPA.
Further, since the intangible loss caused by damaged distinctiveness and reputation under the UCPA cannot be proved with a specific amount of damages due to the nature of such loss, the Court may acknowledge a due amount of damages based on the purport of the overall argument and the results of examination of evidence pursuant to Article 14-2(5) of the UCPA.

B) Occurrence and Scope of Liability for Compensation of Damages

By the rule of thumb, it is clear that the Defendants’ act of damaging distinctiveness and reputation would further damage the Plaintiff’s reputation or credibility, causing intangible loss to the Plaintiff, the Defendants is liable to compensate intangible loss to the Plaintiff.
With respect to the amount of damages to be compensated by the Defendants, the purport of the overall argument and various circumstances found in the results of examination of evidence taken into account, including the degree of reputation and credibility of the Plaintiff and value of the Plaintiff’s brand; scale of the Plaintiff’s business; degree of the damage to distinctiveness and reputation; type and nature of damage expected; degree of actual damage; degree of malice; duration of a damaging act by the Defendants and the Defendants’ scale of business; and the regional scope of the Defendants’ business, the amount of damages to be jointly paid by Defendants C and D shall be set as KRW 50 million and that to be compensated by Defendant E as KRW 40 million.

4) Final Amount of Damages Granted

A) Defendants C and D

Defendants C and D shall jointly pay the Plaintiff KRW 50 million. In addition, they shall pay the following: (1) with respect to KRW 30 million of the KRW 50 million, which was granted by the District Court, the delay damages at an annual rate of 5% as stipulated in the Civil Code for the period from July 10, 2015, which is after the date of relevant unlawful act as claimed by the Plaintiff, to August 24, 2016, the date of the District Court’ decision, in which it was deemed reasonable for the Defendants above to contest existence and scope of their liability; and at an annual rate of 15% as stipulated in the Act on Special Cases Concerning Expedition, etc. of Legal Proceedings from the following day to the date of full repayment; and (2) with respect to KRW 20 million of the KRW 50 million, which is additionally granted by this Court, the delay damages at an annual rate of 5% as stipulated in the Civil Code for the period from July 10, 2015, which is after the date of relevant unlawful act as claimed by the Plaintiff, to June 29, 2017, the date of this Court’s decision, in which it is deemed reasonable for the Defendants above to contest existence and scope of their liability; and at an annual rate of 15% as stipulated in the Act on Special Cases Concerning Expedition, etc. of Legal Proceedings from the following day to the date of full repayment.

B) Defendant E

Defendant E shall pay the Plaintiff KRW 40 million. In addition, Defendant C shall pay the following: (1) with respect to KRW 30 million of the KRW 40 million, which was granted by the District Court, the delay damages at an annual rate of 5% as stipulated in the Civil Code for the period from July 10, 2015, which is after the date of relevant unlawful act as claimed by the Plaintiff, to August 24, 2016, the date of the District Court’s decision, in which it was deemed reasonable for the Defendant above to contest existence and scope of their liability; and at an annual rate of 15% as stipulated in the Act on Special Cases Concerning Expedition, etc. of Legal Proceedings from the following day to the date of full repayment; and (2) with respect to KRW 10 million of the KRW 40 million, which is additionally granted by this Court, the delay damages at an annual rate of 5% as stipulated in the Civil Code for the period from July 10, 2015, which is after the date of relevant unlawful act as claimed by the Plaintiff, to June 29, 2017, the date of this Court’s decision, in which it is deemed reasonable for the Defendant above to contest existence and scope of their liability; and at an annual rate of 15% as stipulated in the Act on Special Cases Concerning Expedition, etc. of Legal Proceedings from the following day to the date of full repayment.

7. Conclusion

Based on the foregoing, each of the Plaintiff’s claim for the Defendants is well grounded and therefore is granted to the extent of the scope of acknowledgement above, and each of the remaining demand is without merit and therefore denied. Appeal of the Plaintiff and Defendants C and D shall be partially accepted, and the District Court’s decision shall hereby be amended as above and decided as declared in Order.

Presiding Judge Hwansoo KIM

Judge Jootag YOON

Judge Hyunjin CHANG