BAE, KIM & LEE

As the information society approaches, the past economic system, which focused on tangible products, is changing to one centering upon intangible property: information. Professor Negroponte, Chief of the Media Laboratory at Massachusetts Institute of Technology in the United States wrote, in his book entitled "Being Digital," that while society previously concentrated on the atom, it is now evolving into a society centered around the byte, the basic unit of computer-related signals. In other words, while tangible goods formed the basis of economic activity in the past, society is now centering more and more on "digital goods." The simple fact is, the information society is not something for the future -- it's already here.

According to the September 1995 Report of the Working Group on Intellectual Property Rights, more than half of all workers in the United States are involved in the information industry and the speed at which the communications industry is developing is the highest among industries in the U.S. In Korea, the growth rate of information-related industries, including software, information and communications assistance and multimedia, was more than 30% in 1994, and the information related industry is still growing (1995 Electronic Communications Year Book of the Korean Ministry of Information and Communication).

The most striking feature of the currently evolving information society is that the information revolution is taking place through national or international communication networks. Through communication networks such as the Internet, we can see the developing features of the future information society.

Both in Korea and worldwide, it is obvious that industrial and economic systems are developing extensive communication networks, but from the perspective of the legal system, there has never been an effort to revise basic laws in order to meet such social change. The concepts set forth in existing law are inconsistent with the current state of affairs, and thus the time to research basic concepts affecting this area, in various fields of law, is long overdue.

In order to set a new course for legislation in the information society, I shall use herein the concept of "Information Unit" (to be contrasted with Product, the customary unit of transactions hitherto used in the industrial society). A product is customarily transacted by way of purchase and sale, but an Information Unit is transacted through the grant of the right to use the Information Unit, by the use of so-called licensing agreements.

In addition, the extensive supply of communication networks as forums for transacting such Information Units will be an increasingly common characteristic of the information society. The network is a general concept including wireless networks (communication under the Electronic Communication Business Act means only intermediary acts connecting information after its receipt through wireless network), wire networks such as optic cables, and satellite networks.

In this article, I intend to present, or at least suggest, an opportunity for general research into relevant laws and regulations by examining several areas of the law which require revision as the Information Unit and as networks for transaction of the Unit gradually make their appearance on the scene.

1. Legislation Covering Purchase and Sale Should Include Licensing Agreements
   In the information society, the legal right to the Information Unit is an intellectual property right, and copyright is the principal right involved. The Information Unit is transacted in the type of grant of right to use such intellectual property right or copyright (licensing agreements).

   The laws on purchase and sale of products or laws providing for goods or consumers' rights, such as the Consumer Protection Act, are intended to safeguard consumers' rights and ensure benefits to consumers. In order to achieve the same level of protection in relation to the Information Unit in the information society, such laws should be extended to apply to software and writings, etc. which are transacted under licensing agreements, quite separate from existing purchase and sale transactions. In principle, we should examine previous laws to examine whether there are to be found articles which might readily be applied to the Information Unit. With some other laws, however, the principle to be followed is that of a negative examination of previous laws, so as to ascertain which specific articles do not apply to the Information Unit. The provision for guarantee against defects, currently applied to goods, could similarly be applied to the Information Unit. Laws which are otherwise relevant but do not address in adequate fashion the special nature of the Information Unit run the risk of readily becoming obsolete, or at best of only highly limited application, in the future information society. In the case of the United States, as one example, it would be advisable to include licensing agreements within the scope of purchase and sale provisions under the Uniform Commercial Code.

   Restriction on Unfair Transactions -- Modification into Restrictions Affecting the Information Unit

   The Korean Monopoly Regulation Act applied to monopolistic and oligopolistic enterprises, and the typical activities which were the subject of such laws were, for example, dumping and predatory or other unfair business practices, involving traditional type products. In the information society, the regulation of unfair transactions in the case of licensing agreements granting technical license and software license, etc. is a critical necessity.

   In Chapter 8 of WTO TRIPs, it is clearly provided that activities adversely affecting competition in the market such as package licensing, refusal to license or unfair discrimination in the case of technical licensing may be regulated by countries as abuses of intellectual property rights. The consequences of unfair transactions in the Information Unit market could prove to be even more nefarious. The reproduction costs or marginal production costs of the Information Unit are almost zero, while the effects of standardization on the external economy are substantial. Thus, the market structure of the Information Unit is one which can easily be monopolized. Therefore, in the case of the Information Unit, the failure to address the issue of unfair transactions in that market could be even more damaging. In addition, if an entrepreneur controlling the market engages in unfair transactions, the damage may well be particularly widespread. For the future, either existing laws pertaining to purchase and sale of products and regulating unfair transactions therein, should be interpreted as applying to all transactions subject to licensing arrangements, or new legislation covering this specific issue should be enacted.

   In that regard, Article 59 of the Korean Monopoly Regulation and Fair Trade Act provides that "the provisions of this act shall not apply to acts which are deemed to be an exercise of rights under the Copyright Act, Patent Act, Utility Act, Design Act or Trademark Act." This appears to be inconsistent with the above international treaty and therefore this provision should be narrowly interpreted or indeed amended through legislative revision.

   Restructuring of Concept of Sale under Laws Applying to Corporations Producing the Information Unit

   One of the characteristics of the Information Unit is that the raw material is intangible and thus the added value is very high. It is, in consequence, entirely reasonable, when applying laws to corporations producing Information Units, to do so not on the basis of sales value but of added value.

   In particular, in defining monopolistic enterprises, the present criteria are based on sales turnover of more than 50 billion Won, and thus Microsoft Korea, despite occupying more than 90% of the Korean PC operating system market, is not deemed a monopolistic corporation. The reason for this irrationality, notwithstanding the fact that no one deems software less valuable than a sausage in the present information society, is that almost all the laws concerned are currently based on the product economy and do not take into account the characteristics of the Information Unit. In the information society, in contrast, the capacity to create added value should be the basis for measuring the true effect and profitability of enterprises. I believe that such standard should be applied to criteria for listing in the securities market the stocks of highly advanced technology enterprises.

   Extension of Concept of Import

   The term "to import" under the current Customs Act and other laws means the act of bringing in goods across national boundaries. In the information society, inter-connected through communication networks, such concept of import is no longer appropriate. The Information Unit is available across national boundaries through transmission without such traditional notion of importation, and there is no provision controlling the transmission of such economically valuable products through such route, a fact which is giving rise to problems in legal construction. Of the different specific types of Information Units in existence, various products reflect the difference in each nation's cultural and moral precepts and standards; thus their exportation and importation are subject to significant regulation. In contrast, transmission is never subject to any regulation. In the case of importation of goods which infringe another's copyright, customs clearance of such import must be denied; in contrast, in the case of transmission no such restriction is imposed, which offends the principle of equality.

   Through the extension of the concept of importation, dumping of the Information Unit or industrial damage caused by reckless importation of the Information Unit could be restricted on an emergency basis or other adequate action could be taken to meet the needs of the Information Unit industry.

   Issue of Taxation on Software Could be Settled by Defining the Information Unit

   In the case of software -- the archetypal form of Information Unit -- no definition of importation exists. This has hitherto resulted in some cases where unreasonable customs duties, or the withholding of corporate taxes on royalties, were imposed based on the introduction of the Information Unit being deemed as the introduction of technology as such. Such cases resulted from the tax authorities' ignorance of the difference between technical licensing agreements made for the purposes of producing the Information Unit and licensing agreements merely for basic transactions in the Information Unit. In many cases, the tax authorities have imposed withholding taxes on the grounds that the Information Unit was imported through licensing agreements even though only the Information Unit itself was imported without the actual technology necessary for reproduction of the Information Unit.

   Such confusion is likely to persist in the future, so long as the concept of Information Unit remains undefined. Thus, the concept that the Information Unit is subject to import should be defined, and unreasonable provisions of law should be amended.

   Application of the New Concept of Intellectual Property Right in Accordance with the Extension of Communication Networks

   I would like to identify some specific items among the concepts of intellectual property rights which I believe require modification in response to the formation of the communication networks which now represent the new marketplace, the market for transacting the Information Unit, with the information society built on, or at least characterized by, a communication network-based infrastructure.

   The current Copyright Act provides that the copyright holder has rights to reproduction, performance, broadcast, display and distribution of his or her works. However, in the information society based on such a communication network infrastructure, the right to transmission should be given to the copyright holders. Through communication networks a user may transmit works to one or many persons at the same time -- such act has not been subject to the application of any legal concept under the current copyright act and thus it is possible to interpret this as permitting anyone to transmit works freely without the permission of the copyright holder. However, transmission through networks is the most important method for transacting of works and such transmission free of charge is inconsistent with the purpose, spirit and overall intent of the Copyright Act.

   In consequence, in any future legislative amendment it is essential to include the new activity of distribution through transmission within the concept of copyright.

   Network Business - Harmony between the Broadcasting Act and the Communication Act

   Another of the most notable features of the information society is the appearance of network enterpreneurs.

   As communication networks extend to distant areas, broadcasting and communication will gradually become united and substantial amounts of the Information Unit currently supplied by broadcasting will be supplied through extensive communication networks. In such circumstances, laws on broadcasting periodicals will be revised as new, extensive networks (Korean high speed communication networks) make their appearance. For example, according to the Act on the Registration of Periodicals, a foreigner or a foreign corporation may not hold the majority of shares in a periodical business which purports to supply information, whereas a network entrepreneur of a foreign corporation may supply such services, upon setting up its value added networks, through PC online or via the Internet -- an entirely contradictory and illogical situation. Thus, one of the two acts has clearly failed to reflect current trends, and should be amended in order to render the statutes mutually consistent.

   Mandatory Authorization System

   In the United States, so long as cable television businesses pay the Copyright Committee a fixed fee for the grant of the legal right to use, they are basically free of worries with respect to infringing copyright to broadcast programs, a fact which has encouraged the rapid development of the American cable industry. Given that substantial amounts of the Information Unit have the nature of a database under the infrastructure of networks, and in order to achieve a balance in the protection of rights between user and right holders as well as to foster the development of the database industry, the introduction of a similar system in Korea should be affirmatively reviewed. Under such new mandatory authorization system, copyright holders should be obliged to distribute information concerning permission to use copyright together with their works and if copyright holders do not distribute such information together with their works or if it is, in practice, unreasonably difficult to obtain permission to use works, it would be desirable to deem in such cases that mandatory permission has actually been granted and to allow use of the works after the depositing of fixed fees.