Supreme Court Decisions on Cybersquatting: Must the Trademark Famous in Korea to be Protected?

On September 12, 2013, the Supreme Court rendered its decision on the cybersquatting case between an individual holder of domain name and an entity holding the trademark of National Cheerleaders Association.  The Supreme Court’s ruling provided guidance on who may request cancel or transfer registration of a legally registered domain name and the definition of illegal cybersquatting.

What is Cybersquatting…
Cybersquatting is registering, trafficking in, or using a domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone else.  The cybersquatter then offers to sell the domain to the person or company who owns a trademark contained within the name at an inflated price. 
In principal, the domain names may be registered on a first come first served basis, but the law prohibits cybersquatting to protect the trademark holder to register and use the domain name so that he/she may enjoy the value of trademark on internet, and to avoid confusion among the internet users.  In Korea, the law prohibits cybersquatting through Article 12 of the Internet Address Resources Act (“IARA”): “Prohibiting Registration of Domain Names for Unlawful Purposes”, which states as follows:
(1) No one shall obstruct the registration of any domain name, etc. of persons who have a legitimate source of authority, or register, possess or use domain name for unlawful purposes, such as reaping illegal profits from persons who have a legitimate source of authority. (2) when anyone registers, possesses or uses a domain name, etc. in violation of paragraph (1), persons who have a legitimate source of authority may request the cancellation of such domain name or transfer of registration of such domain name etc. to a court.

A Person with Legitimate Source of Authority
In the recent Supreme Court case, the Appellant argued that the Appellee is not considered to have a legitimate source of authority as the mark is not widely known to the public in Korea.  The Supreme Court disagreed with the Appellant and ruled that to determine one’s legitimate source of authority does not require a trademark to be widely famous domestically; and as a result, the Appellee has the legitimate source of authority, despite its un-widely known trademark in Korea.
In this case, the Appellant is an individual residing in Korea, who has legally and legitimately registered a domain name, “nca.com” through an accredited registrar in Korea.  The Appellee, parent and affiliated of the National Cheerleaders Association (collectively “NCA”), is an organization which was established in 1948 and began using NCA as their trademark since 1952 and registered its mark in 1997 in the USA and in 2002 in EU.  Through mergers and acquisitions occurred in 2008, all trademarks of NCA had been succeeded and transferred to Appellees and the Appellees became rightful owner of all intellectual properties of NCA. 
The Appellee brought claims against the Appellant to cancel and remove the registration of the domain name, nca.com, under the U.S. Federal laws and the international laws at the National Arbitration Forum and succeeded.  Thereafter, Appellant brought the claim in courts of Korea to rescind the decision alleging that the Appellees had no such standing under the grounds that the Appellees are not the rightful owners of the trademark and such trademark is widely known in Korea to create legitimate source of authority.
The Court stated that if one requesting for cancellation or transfer of a domain name were to be considered to have legitimate source of authority under Article 12 of IARA, there shall exist close associative correlation between the trademark of the one which has been used and registered for period of time at a domestic and/or foreign authority prior to the registration of the domain name and the already registered domain name that is similar or identical to the trademark of another. And at the same time, there shall exist direct relativity and enough reason for protection that cancellation without compensation is just under our justice system. 
In its reasoning, the Court considered legislative history behind the IARA as well as the 2009 amendment of the Article 4 of IARA where it expanded its effectiveness to cover all domain names that has been registered, possessed or used in Korea; and the limited prohibition on one without authority to register, possess, transfer or use identical or similar domain name of another’s trademark under the Unfair Competition Prevention and Trade Secret Protection Act.  Court then concluded that to determine and acknowledge a person holds legitimate source of authority against a domain name does not necessarily require a trademark that is widely recognized and known in Korea.

Bad Faith – Registration of Domain Name for Unlawful Purpose
In the case of NCA, the Appellant had previous knowledge of the mark as well as the fact that the domain name of NCA.COM was not registered by the Appellee.  The Court, based on the overall circumstantial factors, decided that the Appellant preoccupied the domain name to interfere with or to take unjust profits from the Appellee.
The Court reasoned their finding of Appellant’s reaping of illegal profits upon considering many factors such as, 1) whether the degree of similarity or identicalness of the domain name and the mark, 2) whether the person who registered the domain name had knowledge of the trademark prior to registration, 3) whether the person previously had made profits from sale or lease of the domain name on a different occasion, 4) whether the person actually operated and/or used the website for its purpose, 5) whether the domain name is identical to and/or similar to the business purpose of the service or merchandise provided on the website, 6) whether internet users have been falsely directed to the website based on their knowledge of the trademark, and other various circumstances around registration, possession and use of the domain name and website.
The Court specifically pointed out the facts that the Appellant operated the website to provide cheerleading outfits and equipments and placed links that directs the users to websites of the Appellee’s competitors evince that the Appellant had prior knowledge of the Appellee’s mark and registered the domain name for the unlawful purposes to make unjust profits on bad faith.

Upon the Supreme Court decision, the foreign trademarks that are not widely known domestically nor registered in Korea are equally protected by the IARA from bad faith preoccupation of domain names to reap illegal profits.  Lee, Kim & Yoon has years of experience in working with foreign companies in protecting the intellectual property rights and assisting in trademark disputes; for specific advice on these issues, or any other issues, please contact us directly.