Rolls Royce limits ‘trademark use’ definition for domain names

In refusing to transfer ‘rolls-royce.co.kr’ to Rolls Royce, the Korean Supreme Court has declined to extend the definition of ‘unauthorized trademark use’ to domain name warehousing or use in connection with goods and services unrelated to those covered by the mark in question (Case 2001Da57709). However, the anti-cybersquatting provisions that will come into force later this month are likely to limit the decision’s value as a precedent.

Young-Ho Yoon registered the domain name ‘rolls-royce.co.kr’ to host a website providing general information about aeroplanes and patents, and links to third-party sites, none of which relate to automobiles. The website does not contain any advertisements, nor is the ROLLS ROYCE mark used anywhere on the website. Rolls Royce, which owns registrations in South Korea for the word mark ROLLS ROYCE for cars, internal combustion engines, and related goods and services, demanded that Yoon transfer the domain name to it. Yoon requested that Rolls Royce pay the expenses incurred during Yoon’s seven years of study in England, which amounted to hundreds of thousands of dollars. Rolls Royce subsequently sued Yoon for trademark infringement, unfair competition and dilution on the basis of its registered trademark rights, and the fame of its mark and trade name.

The case eventually reached the Supreme Court, which ruled against Rolls Royce on the three counts. The court agreed that the disputed domain name contains the ROLLS ROYCE mark. However, it rejected Rolls Royce’s contention that use of a trademark in a domain name constitutes “display or distribution of a trademark on signboards or labels” under Article 2(1)(6)(c) of the Korean Trademark Act. The court reasoned that as the goods and services to which the website relates are neither identical nor similar to those relating to the ROLLS ROYCE mark, the mark was not infringed.

Turning to the unfair competition claim, the court opined that the mere registration and use of the disputed domain name in relation to non-competing goods and services does not amount to unfair competition pursuant to Articles 2(1)(a) and 2(1)(b) of the Korean Unfair Competition Prevention and Trade Secret Protection Act (UCPA). While the court acknowledged the fame of the ROLLS ROYCE mark, it ruled that it was not sufficient to create an actionable cause of action for unfair competition since there was no evidence suggesting that consumers might be confused by the domain name alone.

Finally, the court rejected Rolls Royce’s dilution claim under Article 2(1)(c) of the UCPA, finding that the domain name did not damage the distinctiveness or reputation of the ROLLS ROYCE mark. The court also rejected the argument that Yoon’s request for money for the transfer of ‘rolls-royce.co.kr’ constituted unfair competition because it neither created confusion nor damaged the distinctiveness or reputation of the ROLLS ROYCE mark.

The Rolls Royce Case is the first decision in which the Supreme Court has formally set the outer perimeter of what constitutes unauthorized trademark use. Specifically, the court declined to expand the concept of unauthorized trademark use to encompass domain name warehousing, which is when the registrant does not use the domain name in any meaningful sense, or use in connection with goods and services unrelated to those to which the mark incorporated in the domain name applies.

However, the Rolls Royce decision is expected to have limited precedential value as new causes of action against cybersquatters will be available when (i) the amended UCPA comes into force on July 21, and (ii) the Internet Address Resource Act (IARA) comes into force on July 30.

Under the new UCPA provisions, the act of registering, holding, transferring or using a domain name incorporating an element that is identical or confusingly similar to a third party’s famous trademark or trade name in Korea, without legitimate purpose, constitutes unfair competition (see Korea revises Unfair Competition Law). The IARA expressly prohibits the unlawful registration of a domain name incorporating a third party’s trademark or trade name and enables the rights holder to seek cancellation of the offending domain name’s registration in court.

Young S Kwon and Sung-Nam Kim, Kim & Chang, Seoul