[Patent Talk] Parallel Imports of Foreign Goods and Trademark Infringement

The head of a company that had parallel-imported and sold Simmons beds was recently given a criminal sentence. According to news reports on the 22nd of this month, the Uijeongbu District Court sentenced the founder of S, an overseas parallel-import company, who is also the head of A, a Korean delivery company, and who had been indicted for trademark infringement through illegal parallel importing and delivery, to one year and six months in prison, suspended for three years, and ordered 120 hours of community service. It is considered unusual for a court in a criminal trademark infringement case to accept the prosecution's recommended sentence without any reduction and also to order community service.

Looking at the facts, however, such a heavy sentence is understandable. The Supreme Court had already ruled in 2012 that parallel importing and selling beds made by Simmons in the US infringed the trademark rights of Simmons Korea, yet the defendant transferred the parallel-import company S to another person, established the delivery company A, and deliberately continued the infringing activity by handling only the deliveries.

In general, however, parallel importing and selling foreign goods in Korea is so-called 'parallel importation of genuine goods' and, under the exhaustion doctrine, generally does not infringe Korean trademark rights. Under the principle of territoriality, trademark rights have separate effect in each country, but under the exhaustion doctrine, once a product of a legitimate trademark owner has been sold in a given country, the rights are exhausted, and trademark rights cannot be asserted against subsequent acts of distribution.

Why, then, was the Simmons case found to be trademark infringement? The Korean Supreme Court has held that, for the parallel importation of genuine goods not to infringe Korean trademark rights, (1) the foreign and Korean trademark owners must be substantially the same, and (2) the parallel-imported products must be recognized as identical in quality to the products bearing the Korean trademark owner's mark. This is because the function of the trademark for consumers is not impaired only if the source, that is, the manufacturer or seller, is the same and the product quality is the same. In fact, Simmons Korea in 1993 ...