Trade secret Infringement Lawsuit on Botulinum Toxin between Medytox and Daewoong Pharmaceuticals

Two Korean companies have disputed over trade secret theft about Botulinum Toxin for years. Medytox, in cooperation with its U.S. partner Allergan, has been conducting clinical trials in USA to get approval for its BTX product, Meditoxin.

Last year, Daewoong and its U.S. partner Alphaeon filed for FDA approval for its BTX product, Nabota in USA. Medytox will face competitions of Daewoong in the US market. 

Accordingly, Medytox filed a lawsuit in USA alleging Daewoong of stealing its strain of the Botulinum toxin. But the plaintiff could not succeed to block the competitor’s business in USA through the lawsuit because the lawsuit case was not successful.

On Oct. 12, 2017, the Superior Court of California in Orange County dismissed the case with ruling that the case should be settled in Korea. The court stated that "the court finds that Korea is an alternative suitable forum in which an action can be brought against all defendants."

Furthermore, the US court decided that "if it turns out that the alternative forum is not suitable after all, this court has the power to lift the stay and proceed with the action in the original forum, the court sets a status conference on a stayed matter for April 13, 2018."

According to their press release, Medytox will file a lawsuit against Daewoong in Korea soon.

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Statutory Damages for Trademark Infringement in Korea

Under the Korean Trademark Law, a trademark holder in a trademark infringement lawsuit may elect between actual damages and statutory damages. This election is to be made at any time before judgment is rendered.

 

Actual damages can be based on plaintiff’s lost profits, infringer’s profits or reasonable royalties. A trademark holder must prove the exact amount of actual damages by a preponderance of the evidence.

 

In practice, it is often difficult to prove the amount of damage for IP infringement. The statutory damage is designed to save rightsholders from such difficulties.

 

Under Article 111 of the Korean Trademark Act, a trademark owner may file a claim for statutory damages against a person who used a trademark identical to the trademark owner’s, either intentionally or by negligently, on goods identical to the designated goods.

The amount of statutory damages to be awarded by the court may not exceed KRW 50 million (approximately USD $45,000.).

 

Further, with statutory damages, the court also awards legal cost including attorney fees to the prevailing trademark owner.

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Statutory damages for copyright infringement in Korea

In principle, a copyright holder in a copyright infringement lawsuit may elect between actual damages and statutory damages. This election is to be made at any time before judgment is rendered.

Actual damages can be based on his own lost profits, defendant’s profits or reasonable royalties. A copyright holder must prove the exact amount of actual damages by a preponderance of the evidence.

In practice, it is often difficult to prove the amount of damage for IP infringement. The statutory damage is designed to save rightsholders from such difficulties.

Under Article 125-2 of Korean Copyright Act, a copyright holder may seek statutory damages if the copyright has been registered with the Copyright Commission. If the copyright is not registered, the copyright holder may only receive compensatory damages for actual damage.

The statutory damage is up to 10 million Korean Won (about US$ 9,000) per a copyrighted work. In case the infringement is willful and for the infringer’s commercial interest, the maximum of statutory damage is increased to 50 million Korean Won (about US$ 45,000) per a copyrighted work.

Further, with statutory damages, the court also award cost including attorney fees to the prevailing party.

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Parody Issue in Korea : Hermès International v. Play No More Co. Ltd. Cases

1. Fact

           - Defendant’s Accused Bags with their slogan "Fake For Fun"

2. No Confusion But Disputed Issues

Hermès alleged that defendant Play No More copied its Kelly and Birkin handbag designs which caused consumer confusion. However, defendants argued that no consumer’s confusion was caused by their goods.

Further, in particular Hermès claimed that defendant infringed Hermès’ economic interest with unfair competitive acts under Article 2(1)(j) of the Korean Unfair Competition Prevention and Trade Secret Protection Act (“Unfair Competition Act”).

Accordingly, the issue was whether defendant’s good is allowable as a parody or not allowable as a unfair competitive act under Article 2(1)(j) of the the UCPA catch-all provision, Article 2(1)(j).

3. Court’s Decisions

At the first instance, the Seoul Central District Court confirmed that the designs of the Kelly and Birkin bags were protected by the catch-all provision. The Court concluded that, even though there was no risk of consumer confusion, these designs of luxury handbags should be given legal protection and not given over to the public domain.

On the other hand, the Court noted that Play No More's slogan, "Fake For Fun," implied that Play No More intended to free-ride on Hermès' goodwill. The Court concluded that Play No More's unauthorized actions unfairly took advantage of Hermes' work product and were conducted in a manner contravening fair trade practices and competition order. The court ordered a permanent injunction on the manufacture and sale of the infringing products and damages.

However, at the second instance the Seoul High Court sided with defendants. The appellate court reversed the lower court’s ruling and dismissed all of Hermès claims. The case was appealed to the Korean Supreme Court and is pending.

 

Protection of “Trade Dress” in South Korea

Although the definition of “trade dress” is not specifically found in any IP laws of Korea, trade dress is protectable under the Unfair Competition Prevention and Trade Secret Protection Act ("UCPA"). 

In particular, the UCPA catch-all provision, Article 2(1)(j) protects a party's right to profit from work and intellectual property that it has produced at considerable effort or investment by prohibiting the unauthorized commercial use of such work and IP by others in a manner that contravenes fair trade practice or competition order.

Under the UCPA's "catch-all" provision, a party may not interfere with another person's right to profit by appropriating for one's own business use, without authorization, anything which the other person produced through considerable effort and investment in a manner that contravenes fair commercial trade practice or competition order.

This is general and broad to define any acts of unfair competition such as imitating the appearance of another person's product (i.e., the product's shape, pattern, color, gloss, or a combination of these attributes).

On September 21, 2016, the Korean Supreme Court (Case No. 2016Da229058) affirmed that the below trade dress of bakery shop is protectable under the UCPA's "catch-all" provision. The Court held that a bakery shop's general appearance (including the logo, outdoor signage and indoor layout) and other trade dress elements should be protected under the UCPA's "catch-all" provision.

This case is the first case that the Supreme Court specifically recognized the protection of such rights in shop interior and outdoor decorations under Korean law. The defendants were enjoined from unfair business practices by free riding on Seoul Lovers' goodwill, thus meeting the requirements of Article 2(1)(x) of the UCPA. By affirming this decision, the Supreme Court has clearly signaled that the High Court's interpretation was correct, and that trade dress in shop decorations can be protected in Korea under the UCPA. The court ordered defendants a permanent injunction on the manufacture and sale of the infringing products and damages.