South Korean trademark law provides that if a registered trademark is not used properly in South Korea for a three-year period following its registration, any third party may request its cancellation. To avoid a trademark being cancelled due to non-use, there is no alternative but to actually use the registered trademark in South Korea. However, even where the trademark is actually used in some way, this does not necessarily mean that the mark is considered as being used for the designated goods covered by the trademark registration. What is meant by "the goods" in this case? This issue was recently considered by the Patent Court.(1)
The owner of the trademark in this case provided an app-based matchmaking service (Figure 1). The trademark DITTO was registered in Class 9 ("downloadable computer software").
Figure 1: ditto app-based matchmaking service
The app with the DITTO trademark was launched on both the Apple Store and the Google Play Store, available as a free download. The app was an online platform configured to enable users to create a profile based on their personal information (eg, their nickname, age, location and occupation) and an uploaded picture. Users could view each other's profiles within the app to express interest and exchange information. Many services were available free of charge but viewing other users' profiles and sending messages to other users could be done only via in-app purchases.
A third party requested a trial to revoke the trademark registration, claiming that the mark had not been used in South Korea on the designated goods for at least three years without justifiable grounds. This raised the question of what is an app, if not a kind of goods?
In the first-instance trial, it was alleged that the app did not satisfy the requirements of trademark use because there were no independent transactions with exchange value in and of themselves (ie, there were no transactions in the form of a product being sold to users in return for payment). Instead, the app was simply a product provided in the running of a matchmaking service.
According to a theory established by the Supreme Court, the term "goods", when in the context of a trademark used with a product, refers to an independent object of commerce with an exchange value that is capable of circulation in the commercial market. Goods are not considered to fulfil the use requirements of a trademark if they:
- function as an advertising medium;
- are distributed free of charge for the purposes of product advertising or sales promotion; or
- are unlikely to be circulated in the commercial market.
The IP Trial and Appeal Board (IPTAB) accepted this line of argument and rendered a decision to cancel the trademark registration.
The trademark holder appealed the IPTAB decision to the Patent Court, which reversed the decision. In doing so, it was noted that while the app could be downloaded for free from the Apple Store and the Google Play Store, the plaintiff obtained profits from consumers' in-app purchases paid for while using the app. Accordingly, it was judged that the app was not merely incidental to the matchmaking service business, but was in fact an independent object of commerce with an exchange value and thus considered as "goods" for the purposes of trademark use.
It is a well-established theory that "goods" in the context of trademark use are independent objects of commerce with exchange values. This definition does not cover goods functioning merely as an advertising medium typically distributed free of charge.
However, even if free apps appear to be freebies offered without conditions, they may be considered to have an exchange value, especially when they include a way for users to pay fees associated with the app, or if users are required to view advertisements – from which the trademark owner profits – at some point while using the app. In such case, the app is likely to be considered as commercial goods.
As such, the Patent Court was not concerned simply with the fact that the app was free to download, but also considered factors including:
- the method of usage;
- the ways in which transactions took place; and
- general commercial conditions.
Further, the Patent Court analysed whether the trademark holder obtained profit from app-related fees paid by users.
For further information on this topic please contact Ben Yuu at NAM & NAM by telephone (+82 2 753 5477) or email ([email protected]). The NAM & NAM website can be accessed at www.nampat.co.kr.
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