The use of trademark licensing fee was previously considered to be within the full discretion of individual companies, with decisions regarding whether to collect royalties and at what rate left entirely to their own judgment. However, such autonomy h...
The use of trademark licensing fee was previously considered to be within the full discretion of individual companies, with decisions regarding whether to collect royalties and at what rate left entirely to their own judgment. However, such autonomy has, in some cases, exceeded the bounds of responsible management. There have been instances in which excessive royalties were paid under the names of family members of company chairpersons, thereby harming corporate operating profits or distorting fair trade practices.
In response, the Korea Fair Trade Commission, in March 2018, adopted the “Regulations on the Disclosure of Material Matters by Affiliates of Business Groups Subject to Disclosure,” which mandate that companies of a certain scale disclose details of trademark transactions conducted with affiliated companies. Furthermore, the courts have deemed that receiving royalties through unjust methods, thereby causing damage to the company, can constitute a breach of fiduciary duty.
While, in principle, the payment of trademark royalties is to be determined autonomously between holding companies and affiliates, or between parent companies and subsidiaries, the legal environment and the methods used to calculate royalty rates have created the potential for criminal sanctions. Specifically, from a criminal law perspective, trademark royalty issues may involve breach of fiduciary duty; from a corporate law perspective, they may relate to the prohibition against misappropriation of corporate opportunities; and from a fair trade law perspective, they may violate prohibitions on unjust provision of benefits to related parties or unfair intra-group transactions.
Despite these concerns, Korean law currently provides no guidelines or standards for setting trademark royalty rates. Consequently, although contracts for trademark use are largely governed by private autonomy, they remain subject to tax audits and criminal liability. This regulatory imbalance may lead to conflict between the principle of private autonomy and the legal foreseeability, and it also creates uncertainty from the perspectives of corporate management and shareholder protection. Therefore, it is necessary to establish standards that ensure fairness and legal stability in the determination of trademark royalty payments. Accordingly, this study seeks to examine the legal issues surrounding trademark royalties, analyze foreign regulatory policies related to the fairness of such contracts, and propose institutional reforms to promote fairness in domestic trademark royalty agreements.