The utmost challenge for the EU right-holders is the lenient sentencing practices against trademark law violators by the Korean courts. According to the recent court results on criminal trials of trademark law violations, less than 10% of the defendants were ordered imprisonment for a definite term at the first trial. In the case of criminal trials in which indictments were issued, a majority were ordered parole and given low penalties compared to the seriousness of the offense.

EU right-holders are concerned over the courts’ tendencies to be reluctant to sentence effective and dissuasive penalties. The report on the ‘Results of IPR enforcement’ released by the Supreme Prosecutors Office showed that counterfeiters as the violators of the Trademark Law and Unfair Competition Prevention and Business Secret Protection Law are most serious and repeated offenders among all IPR violators. Considerable number of counterfeiters is malicious criminals and need to be penalized, accordingly. Unless the Korean courts cease the lenient sentencing practice on such counterfeiters, the law would lose its deterrent effect and the deleterious counterfeiters will continue to grow.
Pertaining to Article 41 of the Trade-related Aspect of Intellectual Property Rights (TRIPs) requirements of “effective” enforcement, onerous penalties and sanctions against trademark violators should be imposed to ensure better protection of IPR owners and their rights.

The EU Chamber welcomes the recent efforts made by Korean authorities to enhance dialogue with the right-holders as well as the newly established divisions dedicated to counter IPR infringement activities in the markets and on cyberspace. Because, the prosecutors have the jurisdiction of arresting, investigating and confiscating counterfeited goods and manufacturing tools, right-holders rely on the authorities to put in consistent efforts to eradicate the IPR infringement activities going on in unprecedented levels. The following specific opinions have been given on the current issues faced by trademark owners and recommendations on strengthening anti-counterfeiting activities. The EU Chamber provides the following input to build on recent progress in enforcement related activities against trademark law violators:

According to the Ministry of Justice (MOJ), there are currently 35 prosecutors assigned to IPR related cases. However, not all of their workload is related to IPR issues. We often come across prosecutors who are overburdened because they have to handle “other criminal matters” besides IPR.

EU right-holders welcome the intensive crackdown operations conducted by the Korean enforcement agencies and find the outcomes to be making a significant difference. However, due to the fact that these crackdowns are conducted intensively for a certain number of months per year, most counterfeiters resume their business as usual after the crackdown periods are over.

In Korea, counterfeiting and piracy thrive in part due to large marketplaces that facilitate IPR violations. Currently, the law enforcement agencies prioritize crackdowns on large scale distributors and manufacturers. However, there is a need to tackle the visible and easily accessible small and medium sized vendors who carry on IPR violating business activities in major shopping areas or tourist sites like Dongdaemoon, Namdaemoon, Itaewon, and Myung-dong. Compelling evidence leads us to believe that these small and medium scale shops selling counterfeit goods coincide with criminal syndicates involved in money laundering and drug trafficking. The corresponding nature of counterfeit trafficking and money laundering is now a global phenomenon in which the European Council, the EU Commission and Interpol have pointed out it to be accumulating rapidly due to the high profitability with minimum risk of retribution involved. Private investigation results and records by EU right-holders support the notion that Korea is not exempt from this situation.

There are a full gamut of losses posed on the Korean government due to illegal activities of counterfeiting and piracy, including but not limited to the loss of taxation and excise revenue, the loss of opportunities for foreign investment because of the suspicion that the investment will be negated by competing counterfeit activity, the discouragement of inventiveness because of competing counterfeit activity and the loss of foreign exchange and employment because of competing counterfeit activities. In terms of Korea’ international image, as the 11th economy in the world and the 12th member of the Organization for Economic Cooperation and Development (OECD), it would be in the best interests of the Korean government to transition from the consumer’s haven for highly sophisticated counterfeit goods to a country that has the strongest regulatory and statutory framework against IPR violators regardless of size and scale that can protect both the consumers and investors consistently.

As a ‘Special Autonomous Province’, Jeju Island has gained freedom in administration to the greatest extent permissible under the Korean constitution. In light of this new legal status enacted in 2006, the EU right-holders are concerned over the lack of transparency and the tendencies of local protectionism in connection to IPR related crackdown operations conducted by the local police authorities. Cases in point involve the local police authorities’ obscurity in providing basic evidence stipulated by law and the local protectionism in the form of calling off substantial investigations or crackdowns later found to be based on local ties between infringers and authorities. Relative to the Jeju province’s master plan of building a "prosperous Jeju," we appeal for the government to strictly monitor the aforementioned cases and to assure the transparency of the crackdown operations handled by the special autonomous province.

During meetings with the Prosecutors Office last year, the authorities expressed their awareness of the fact that the Korean Courts award inept punishments against IPR infringers. Case in point, a defendant (i.e. personal wealth estimated at 15,000,000,000 KRW) accused of trademark law violation, and who already had two prior convictions (caught manufacturing and trading approximately 20,000 counterfeit goods during his second seizure) was sentenced to 8 months imprisonment with a suspended sentence of 2 years on his third indictment. At the end of the day, even with a prior record and evidence that the business was prospering under the spouse's name but upon the defendant's supervision, the defendant managed to avoid retribution that was severe enough to deter him to re-commit the crime. For instances like this, the ultimate deterrent that can be levied against such criminals, is pecuniary penalty. Together with provisions of appropriate pecuniary sanctions, law enforcement agencies must confiscate, in addition to the counterfeit products, any and all items that are related to the criminal activities such as vehicles, carts, tables, tools, and termination of the lease with security deposit forfeited to trademark owners as damages, in order to implement effective and deterrent enforcement.

On average, it is not unreasonable to assume that the law enforcement agents are not fully aware of well known designer brands, let alone the difference between “genuine” and the “counterfeit” products. Although it is true that no one can have full knowledge of all the brands circulating in the Korean market, we believe that enhanced education programs including basic information on designer brands as well as techniques to discriminate between counterfeit and genuine designer brand goods shall support the operational efficiency of law enforcement agents, who are in charge of anti-counterfeiting and piracy investigations or raids. Right-holders have been providing several trainings a year to the officials of the Korea Customs Service to strengthen Customs officers’ IPR enforcement capacity, and have so far received excellent feedback and results. Although, the International Intellectual Property Training Institute organized by the Korea Intellectual Property Office (KIPO) conducts annual IPR related education programs, limited time is allocated in dealing with the enforcement techniques, especially on discriminating genuine and counterfeit goods of designer brands, which the front-line law enforcement agents have claimed to be most useful in implementing IPR related investigations, crackdowns and seizures.

With respect to the counterfeit problem, there are two sides to the equation: supply and demand. Although not completely effective, the law enforcement actions have tackled the supply side. However, the demand side is rather untouched. In 2006, Korea was ranked as the 6th largest user of the World Intellectual Property Office’s (WIPO) Patent Cooperation Treaty (PCT), which helps Korea to consolidate its advanced status in the world’s IPR community. Despite such external growth, software piracy in Korea amounted to 46 percent in 2005, according to the Business Software Alliance and industry experts. Because we live in a world where wealth generation is increasingly the result of ideas rather than products, it is critical to assist the public to promote the concept of IPR protection as a strategic tool for development and prosperity through effective and consistent awareness campaigns and education programs in schools. Consumers often do not realize that part of the reason why counterfeit goods are cheaper than genuine goods is because they are poorly made and sometimes even dangerous. Last year, raids on counterfeit cigarettes seized were found to have contained toxic elements such as arsenic and lead in addition to up to 500% more cadmium than genuine goods, which can be harmful and deadly. Like so, counterfeit goods can have much greater consequences than people realize, and the government needs to go beyond the current lengths to warn the public of such harms involved.

Problems involving IPR violations among tourists in Korea have also been pointed out. Korea recorded an average of 2.2 million Japanese tourists last year and majority of them have been found to purchase among others, counterfeit goods. They are often lead by middlemen- tour companies and/or tour guides and/or taxi drivers. Frequently, these middlemen are given a percentage of the total sales amount as commission for attracting tourists to the counterfeit goods selling vendors or shops. At minimum, tour companies, tour guides and taxi drivers are aiding and abetting the trafficking of counterfeit products. One can even argue that tour companies, tour guides and taxi drivers are directly involved in counterfeit trade as a partner since they share percentage of the profit.

The widespread and easy-to-use multimedia environment in Korea has contributed to the high levels of online sales of counterfeit goods. On-line marketplaces have become a convenient distribution channel for counterfeit goods, due to the anonymity of the transactions. According to the Korea Customs Service, there has been a steep increase in online counterfeiting activities over the years. The number of counterfeit transactions on the Internet also saw a rise from 23% of total transactions in 2003 to 81% in August of 2005.

A large number of suppliers and on-line wholesalers either falsely report their illegal goods overseas as legitimate items to receive import licenses or bring in the goods through peddlers and send the goods to surrounding warehouses. They sell or supply such allegedly illegal goods by showing their import licenses to Internet wholesalers or maintain that the goods are parallel imported goods.

Although some on-line marketplaces or Internet shopping malls run a system for monitoring counterfeit goods, the onus is on genuine brands to alert them of the ones to remove. And when the on-line marketplace does take down adverts for fake goods, it is easy for the traders caught out to do exactly the same again using a different name. It has been pointed out that in some cases; marketplaces provide incentives to traders including those who sell counterfeit goods by granting them with the so-called title of 'power dealer'. Basically, traders who sell the most amounts of goods or those who attain a high level of consumer satisfaction points are entitled as ‘power dealers’. When traders are acknowledged as 'power dealers' they are eligible to receive discounts on brokerage fees by the on-line marketplaces. The trademark law and the act of unfair competition have recognized that those who aid and abet trademark infringement are no less culpable than the direct infringers themselves. Good faith or ignorance is no defense for on-line marketplaces that have the right and ability to supervise the infringing activity, but have not done much to curb the growing amount of counterfeit goods traded on their sites due to many reasons including the direct financial interests attained by such trade.

Recent measures by the Korean government and the National Assembly have shown us that the authorities becoming more aware of the importance of IPR protection. The EU Chamber notes with optimism that Korea has expressed its commitment to resolve IPR issues by initiating a copyright bill to enhance the liability of Internet Service Providers (ISP) to proactively supervise and prohibit file transaction between users. However, we cannot deny that there is still the continued need to take effective action against significant levels of optical media piracy. Recent statistics note that out of South Korea’s total population of 51,301,000, the number of Internet users amount to nearly 33,900,000 making the Internet penetration rate to account for 66.1%. Thus, Korea has the highest level of broadband penetration in Asia, with a majority of the population having access to high-speed Internet services. In accordance with the growth of the number of the internet users, e-commerce in Korea has also been growing rapidly and significantly and there is still room for improvement to fully curb the rampant abuse of copyrights on the Internet.With the establishment of the Investigation Center and the Department of Investigation of high-tech crimes at the Seoul Central District Prosecutor’s Office, the EU business community hopes to see administrative fines for computer software copyright violations to be increased significantly through further policy directives and regulations.

The EU Chamber provides the following measures to realize the effective enforcement of the law against Copyright Law infringement:

There have been increasing changes to Korean patent law that reflect the government's continuous efforts to conform to the international harmonization standards as well as to further develop Korea's IPR protection environment. Last year, the Korea Intellectual Property Office (KIPO) reduced the patent examination period to 10 months and hired additional examiners and assistants to resolve any delayed examinations and to facilitate the issuing of patents.

According to the records by the Korea Customs Service, the number of confiscations at the border of IPR infringement shipments hit a record high in 2006. Though it is primarily attributable to the increased inflow of counterfeits and pirated copies, the implementation of stricter control surely contributed to the rise in the number of confiscations. The EU right-holders note with optimism of the efforts and improvements made last year by the customs authorities.