With the rapid growth of online shopping, various types of platforms have emerged, including direct purchasing , shipping proxies, proxy purchases, and overseas delivery services.
Recently, a significant ruling was issued regarding proxy purchase operations, which straddle the line between direct purchases and overseas delivery.
In this case, the defendant operated a proxy purchase business via Naver Storefarm, selling Chinese products that turned out to be counterfeit. When charged with trademark infringement, the defendant argued the following:
- Proxy purchases do not constitute sales, so the use of trademarks is not a violation of trademark law.
- Since they were unaware that the goods were counterfeit, they lacked the intent to violate trademark law.
However, the Daegu District Court ruled as follows:
- Displaying or advertising a trademark qualifies as “use” under trademark law, regardless of whether the advertisement is intended for sales or proxy purchasing purposes.
- Intent to infringe can be established even under a concept known as willful blindness. The court concluded that the defendant knew the advertised goods might be counterfeit but accepted that risk, thus showing sufficient intent. The defendant’s claim of unawareness was rejected.
(Daegu District Court, Case No. 2021NO2551, April 22, 2022)
Understanding Proxy Purchases
Direct purchases involve a consumer directly ordering products from overseas online stores. If direct shipping to Korea is unavailable, the consumer may use a shipping proxy service.
Proxy purchases, on the other hand, involve a domestic online store that advertises and describes products in detail (including customer reviews) and handles the transaction using the buyer’s personal customs clearance number. The product is then shipped directly to the customer from the overseas store.
While proxy purchases may appear similar to direct purchases, the presence of detailed product pages and additional features makes them functionally equivalent to operating a standard online store.
In direct purchases, small quantities bought for personal use are generally not considered trademark or patent infringement since there is no commercial use. However, running an online store with detailed product pages constitutes commercial use, making trademark usage part of the business operations. Advertising products as part of proxy purchasing can still be considered a form of trademark use. If the advertised product is counterfeit, it may result in trademark infringement.
Only Genuine Goods Are Permitted
If the goods are genuine, proxy purchasing or direct purchases are not an issue. Trademark law cannot restrict genuine goods’ distribution.
Genuine goods are defined as products that:
- Originate from the legitimate trademark holder, whether domestic or international.
- Maintain the same quality between domestic and international versions.
The trademark holders in the export and import countries do not need to be exactly the same entity. If they are related by ownership or licensing agreements, the goods are considered genuine under the same principles that allow parallel imports.
However, counterfeit goods cannot be distributed. Two examples of potential trademark infringement include:
- Re-importing counterfeit goods that were manufactured and sold abroad.
- When the domestic and foreign trademark holders are entirely unrelated entities. In such cases, a product may be genuine abroad but considered counterfeit under Korean trademark law due to the principle of territoriality.
Trademark and Intellectual Property Due Diligence
In addition to trademark issues, businesses must consider patent and design rights. Trademark law, as well as patent and design law, operates on a territorial basis. Therefore, a separate domestic intellectual property holder may exist.
It is not uncommon for online retailers importing products from China to face intellectual property infringement claims from domestic rights holders. This can result in legal actions or lawsuits without prior notice.
Recommendations for Proxy Purchases and Online Stores
Regardless of whether you run a proxy purchasing service, an online store, or a domestic exclusive distribution business, it is crucial to conduct a preliminary trademark and intellectual property check. This includes verifying the trademark registration status to avoid potential disputes.