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South Korea's Supreme Court upheld a lower court's ruling that ordered Sulbing, one of the country's biggest dessert cafe chains, to return the licensing fee of 956 million won paid by a Chinese company.
Sulbing signed a contract in 2015 allowing the Chinese company to open a chain in Shanghai in 2015.
The Chinese firm paid the licensing fee, which covered the rights to use the business name, logo, and business know-how.
Initially, the branch would be managed by the Sulbing headquarters for one year before allowing the Chinese company to open franchises around China for five years.
After the Chinese company found out that trademark registration was very hard due to the proliferation of numerous dessert cafes in China with similar-sounding names and operations, it demanded the contract be nullified.
The Chinese company's basis was the Korean company's failure to inform it of the business environment before signing the contract.
In 2018, a district court sided with Sulbing, saying that the contract did not guarantee the absence of similar brands in China.
An appellate court favored the Chinese firm and ordered that the licensing fee be paid back, noting that trademark registration was crucial both in business success and calculating the fee and that Sulbing failed to notify of the risk of not being able to register the brand in China.
