On December 13, 2012, the Supreme Court ruled that “causing confusion with another person’s goods” as provided under Article 2(1)(a) of the Unfair Competition Prevention and Trade Secret Protection Act (hereinafter, the “Unfair Competition Act”) refers not only to an act of causing confusion to direct consumers, but also to an act of causing confusion to persons who receives assignment of the goods or a third party who sees the goods as carried by consumers (Supreme Court Decision, Case No. 2011 Do 6797, December 13, 2012).

The defendant in this case operated an internet shopping mall through which he sold bags with marks identical to well-known marks affixed to them with a notice that the bags were counterfeit bags. As such, consumers were aware that the bags were counterfeit bags. The defendant was indicted on a charge of “causing confusion with another person’s goods” in violation of the Unfair Competition Act.

The court of first instance had found that there was no violation of the Unfair Competition Act as there was no likelihood of causing confusion as to the source of the goods given that consumers were well aware that the goods are counterfeit goods. However, the Supreme Court remanded the decision by finding that, although the direct consumers may not have been confused as to the source of the goods in light of the quality and the price of the goods and the location and the method of purchase, there is a likelihood that the person who may later obtain assignment of these goods or a third party who sees the goods as carried by the consumer may be confused as to the source of the goods based on the mark affixed to the goods. As such, if there is a likelihood of confusion as to the source of the goods in the perspective of the general consumers, then the act of using the mark or selling goods bearing such mark constitutes a violation of Article 1(1)(a) of the Unfair Competition Act for causing confusion with another person’s goods.

This decision from the Supreme Court is significant in that the concept of so-called “post-sale confusion” was recognized for the first time. The Supreme Court’s decision rules that when examining the likelihood of confusion under the Unfair Competition Act, even if the direct consumer would not be confused as to the source of the good, there may still be a likelihood of causing confusion in violation of the Unfair Competition Act if a third party, looking at the good as used by the direct consumer, may be confused as to the source of the good.