Quarterly updates: “Reformed” goods in Korea, FRAND mediation in Japan, and China’s Draft Trademark Amendment
By Qi Jun Kwong (Affiliated Research Fellow, RCLIP; Hokkaido University)
1. “Reformed” goods: infringement or exhaustion?
Nearly a month ago, the Korean Supreme Court handed down a notable trade mark judgment, addressing a question that sits at the heart of upcycling and IP law: whether alteration or “reform” of a branded good, where the resulting product still bears the original mark, constitutes trade mark use. The full judgment is available here, and Prof Nari Lee has offered a helpful account of the case here.
The line drawn between infringement and exhaustion has long been contested territory for upcycled goods. The governing principle is straightforward enough, in theory: once an alteration crosses into the manufacture of a new commercial item, the act moves out of exhaustion and back into infringement. What makes this ruling significant is where the Supreme Court drew that line. On remand, the court pointed to the use of a trade mark as referring to its function as an indication of source or the forming consumer perceptions, and not merely the physical attachment or presence of a trade mark on a product. Three key points are raised. First, private use is protected: where a branded item is altered at the request of the owner and subsequently returned to them for personal use, the conduct does not constitute trade mark use and exhaustion applies in principle. This is however, subject to several “special circumstances:” circumstances of the reform request, nature of the compensation, ownership of the product, source and proportion of material used, and the decision-making authority. Second, the burden of proving those special circumstances falls on the trademark owner. Third, the threshold for infringing use comes down to control and commercialisation. If the reformer is steering the process and putting the resulting goods into trade as its own products, then it amounts to infringing use.
Relevantly, upcycling was dismissed in a Singapore High Court decision as a potential defence: as long as the use of the branded material is unauthorised, it did not matter that the goods came from an authentic product. The court further remarked that reference to the goods being upcycled is not a “free pass to negate (…) false representation.” The facts are distinguishable, however – the products here were advertised and sold publicly through an Instagram account, and not quite a reform of a good carried out specifically at the request of the owner for private use.
It would be interesting to see how the IP High Court would address trade mark dilution under the Unfair Competition Prevention and Trade Secret Protection Act. A Japanese case comes to mind here - the Tokyo District Court judgment on the use of famous indication under the Unfair Competition Prevention Act, which explored the requirements under Art. 2(1)(i) and (ii): whether confusion is likely to occur, and whether it is similar enough to readily call the famous indicator to mind.
2. Judicial Mediation for FRAND Disputes
The IP Division of the Tokyo District Court has rolled out judicial mediation for SEP cases to facilitate agreement on global FRAND royalties. Details here and here. The initiative builds on a foundation of earlier soft-law efforts in Japan, including negotiation guides by JPO and METI. See also a book chapter by Prof Christoph Rademacher which, drawing on the landmark Samsung v Apple case, notes the difficulties of standard essential patent litigation in Japan; making alternative pathways all the more welcome.
The mediation is designed to be efficient. Disputes are to be resolved within three sessions, overseen by a panel of three members – a judge from the IP Division and two other IP experts. Calculation methods may be varied (top-down, comparable license etc), and parties must set out in their petition and statement of defence the basis for their proposed calculations along with evidence, such as number of units sold and total sales figures. One particularly notable feature: if a party unjustifiably rejects a settlement during this process, that rejection can later be submitted as evidence of an abuse of rights by either party in subsequent litigation.
Japan’s court‑annexed mediation is the first mechanism of its kind specifically to tackle the prevailing problem of determining global FRAND royalty rates. Globally, initiatives to introduce mandatory pre‑litigation conciliation mechanisms have been met with limited success (for example, the withdrawal of EU’s SEP regulation; but see also the potential role of the Patent Mediation and Arbitration Centre in FRAND-related disputes). Notwithstanding extensive debates over the role of alternative dispute resolution in IP-related matters, court‑annexed mediation may offer the kind of structured, credible forum for companies caught in protracted global SEP disputes.
3. China’s draft Trademark Law amendment
China’s draft Trademark Law amendment closed for public comments in February 2026. The draft amendment introduced a number of key changes. Notably, the proposed Art. 14 allows motion marks to be registrable, provided that they are or become distinctive, can be represented graphically, and can come to identify a consistent source of origin.
Other changes include bad-faith filings where there is no intention to use or exceeds the needs of normal business operation (proposed Art. 18); and malicious filings, a broader category covering bad-faith filing (proposed Arts 18 and 21), imitation of well-known marks (proposed Art. 20), marks which are prohibited for registration under Art. 15, and conduct prejudicing a third party’s prior legitimate rights (proposed Art. 23). As for calculation of damages in the event of an infringement, the draft places infringer’s profit on the same footing as actual loss, not merely as fallback when actual losses are difficult to determine. Punitive damages, under the Civil Code likely still apply if it can be proven that the infringement is intentional or involves “serious circumstances,” in addition to the statutory damages.
On motion marks specifically: Japan’s IP High Court has recently rejected an application for a motion mark, depicting a diamond shifting from colourless to blue, on the ground that the colour change was neither distinctive nor capable of identifying the source of the services.