Scope of open-market operators' liability for infringement clarified

In adidas v Interpark (Case 2009Kahap653, September 9 2009), the Seoul Central District Court has clarified the scope and limitation of liability for trademark infringement of operators of open-market websites (ie, websites that provide networks for individuals to sell or purchase goods).

Previously, in SJ Kim v Interpark (Case 2008Kahap1901, August 5 2008), the court had found that operators of open-market websites have a legal obligation to prevent and stop the infringing activities of individual sellers. It held that the defendant had failed to exercise its duty of care because it had not taken necessary additional measures to search, identify, remove and block access to postings of infringing goods.

However, in K2 Korea v Interpark (Case 2006Gahap46488, November 20 2008), the same court held that open-market operators can be found to be liable only where they:
  • knew or could have known of the occurrence of such infringing acts; and
  • had concrete means to prevent the occurrence or eliminate the risk of such acts. 
In that case, the court denied the defendant's liability on the basis that:

  • it had no specific means to prevent individual sellers from posting product information bearing the plaintiff's mark; and
  • it could not have known that the sale of alleged counterfeit products constituted an act of unfair competition (for further details please see "Website operator not liable for sellers' unfair competition acts").
In adidas, the court found that the open-market operator had a duty of care to take appropriate measures to prevent trademark infringement on its website since it earned revenue by providing individual sellers with the opportunity to sell the products at issue. However, the court also held that the scope of such duty of care should be decided after consideration of the totality of the circumstances, including:
  • the differences between open markets and offline markets;
  • the impact on the operation of open markets; and
  • the level of technology.
Regarding the specifics of such duty of care, the court stated that open-market operators should take appropriate measures to:
  • remove a product listing once the product has been confirmed as infringing;
  • establish a system which discourages and reduces trademark infringement;
  • establish a mechanism for the management and administration of individual sellers' personal information - particularly for those sellers that are selling large quantities of counterfeit goods; and
  • provide the seller's personal information when the trademark owner or other lawful rights holder requests such information.
In this regard, the court held that open-market operators can prevent and restrict sales of counterfeit products by using a system to determine the products' authenticity prior to listing or by blocking search terms for a specific trademark. However, these last two measures should be considered only where it is impossible to control sales of counterfeits through other appropriate measures.   

Considering the abovementioned standard, the court held the plaintiff's claims to be groundless for the following reasons. First, as regards the claim for prohibition of sales and display of products bearing the trademarks at issue, the court found that, in an open market, not only counterfeits, but also genuine products, parallel imports and second-hand products are actively sold. Thus, special circumstances must exist before an order can be given to prohibit the posting of all products bearing a specific trademark, since such prohibition would deprive open-market operators of the right to engage in business.

Such special circumstances include where it is impossible to control sales of counterfeits through other appropriate measures. However, in the case at hand, there was insufficient evidence to prove that such circumstances existed. Furthermore, as regards the claim for the full prior inspection or deletion of products bearing a specific trademark, the court held that, in an open market, it is difficult to confirm whether the products posted are genuine. In case of well-made counterfeits, it is hard to determine whether the product is counterfeit, even after the operator has received and examined the actual product. In addition, the court found that pre-inspection may hinder the operation of an open market, where free trade is carried out between individual sellers and purchasers. Further, full pre-inspection of the vast amounts of posted goods would be close to impossible in reality and would thus exceed the scope of open-market operators' general duty of care for the protection of trademark rights. Therefore, the court refused to issue an injunction against the open-market operator.

Kyoung-Sun Lee and Gavin Healy, Kim & Chang, Seoul

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