The Seoul High Court upheld a lower court ruling prohibiting the use of the CHANEL name and trademark on defendant's website and ordered the cancellation of defendant's domain name, chanel.co.kr.

Defendant used the trade name Chanel International, registered the domain name chanel.co.kr and sold, via its associated website, various adult products, including condoms, lingerie and perfumes.

The Seoul High Court, on appeal, reviewed the grounds originally asserted by Chanel before the lower court, namely trademark and trade name infringement and unfair competition. The Court stated that the function of a domain name depends on the purpose for which it was registered. If the domain name simply indicates an internet address, it would not necessarily constitute use of a trademark, even though another party's trademark is used as the domain name. However, if the domain name functions as a source indicator of goods and services provided by the associated website, it can be said to function as advertisement and thus constitute use of a trademark under the Korean Trademark Act.

In this case, defendant had registered his domain name for the purpose of providing mail order services through its associated website, on which defendant also displayed the CHANEL trademark. The Court held that the CHANEL name and trademark are well-known in Korea and consumers are likely to type "CHANEL" as a possible domain name when attempting to access Chanel's home page. Moreover, since the goods, especially perfumes, sold and advertised by defendant on its website were similar to the designated goods under the CHANEL trademark, the domain name could be said to function as a trademark and constitute trademark infringement.

The Court further held that defendant's use of its domain name and website was likely to cause consumer confusion and thus constituted unfair competition. The Court also noted that the likelihood of consumer confusion is even greater in cases involving well-known business names. In addition, likelihood of confusion should not be restricted solely to manufacture and sale of identical or similar products, given the tendency of companies to expand the scope of their business activities.

Finding both trademark infringement and unfair competition, the Court enjoined defendant from using the CHANEL name and trademark on its website. The Court also ordered the cancellation of defendant's domain name, chanel.co.kr, even though defendant had changed its trade name to one not resembling Chanel and removed the disputed goods sold through its website so as to prevent similar future activities by defendant and to provide a complete remedy for Chanel.