Korea Technology Sector Legal Developments

In this issue:

1.       Telecom, connectivity: Korea passes telecom law amendment that will require major content providers to take measures for maintaining “stable” services, and, if offshore, to appoint local representative.

2.       Telecom, connectivity: Key online sector law is amended to add extraterritorial jurisdiction clause (in case of “impact on domestic market or users”), as new requirements are imposed on major online service providers to block illegally filmed content and appoint an in-charge for this purpose.

3.       Mobility, gig economy: Further developments point to extension of employee benefits to platform-based gig workers.

4.       Mobility: Milestones for autonomous vehicle development with launch of framework towards commercial roll-out of “Level 4” by 2024, and regulatory sandbox permit for self-driving delivery and surveillance robots.

5.       Patent law: Korea amends patent law to widen scope of available damages for infringement based on infringer’s profits, by removing anchoring to patent holder’s manufacturing capacity.

6.       Mobility: Amendments to transportation law set up framework for taxi hailing platforms, while “Tada banning” provisions will restrict the popular van-hailing app; regulatory sandbox applications approved.

7.       Telemedicine: Government allows partial exceptions from prohibition of telemedicine, including emergency steps amid COVID-19; situation renews public debate over telemedicine regulation.

Short notes

8.       Copyright, apps and online services: First court decision imposing criminal penalties for “web crawling”.

9.       Mobility (micro-mobility): Amendment of transportation law eases restrictions on e-scooter usage.

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1.       Telecom, connectivity: Korea passes telecom law amendment that will require major content providers to take measures for maintaining “stable” services, and, if offshore, to appoint local representative.

Amendment of Telecommunications Business Act, set to take effect in late 2020, stems partly from disputes involving Facebook and Netflix, and has been framed as step to get leading offshore content providers to pay “fair share” of network costs.

Specifics of the scope of content providers affected, and required measures, await further regulations, to come in 4Q 2020.

Postscript: Possible impact of change in ISP interconnection settlement basis

May 2020: As reported in our separate bulletin, on May 20, 2020 the National Assembly passed amendments of the Telecommunications Business Act (TBA) that will impose some scope of service quality maintenance requirements on value added telecom service providers (VSPs), including content providers (CPs), that meet certain thresholds of scale. The amended law will probably take effect in early December 2020, though this has yet to be set. The thresholds are yet to be defined, other than that they will include such factors as local user numbers and traffic volumes, and nor does the amended statute elaborate on the “measures necessary for providing convenient and stable service”. These things are left to be determined by further regulation, primarily a Presidential Decree that is to be prepared in the coming months at ministry level. VSPs that meet the still-to-be-defined thresholds but do not have a local presence will also be obliged to appoint a local representative, to receive user complaints and answer to regulatory requests for information – which evidently mirrors an existing requirement for online service providers under a separate statute, the IT Networks Act.

Impetus for the legislation included high-profile controversies involving Facebook and Netflix, and a perception that leading foreign content providers use up vast bandwidth without paying a fair part of the connectivity costs. (See e.g. this news report in English.) It would seem a reasonable bet to expect the requirements, once better defined, to apply at least to that class of VSPs, and to focus on avoiding at least the types of slowdowns or disruptions that can generate heavy end user complaints.

Postscript: In a separate development for the interconnection ecosystem that may impact on fee levels and ISP-CP negotiations, the Ministry of Science & ICT (MSIT) has now modified its ISP interconnection standards, to allow for settlement-free mutual traffic between same-tier ISPs to a large degree. Part of the context leading up to the Facebook controversy (referred to above) was that, with effect from 2016, the MSIT rules changed from settlement-free to paid interconnection between same-tier ISPs, which (it is widely believed) caused upward pressure on rates in general. However (in a move anticipated in our preceding newsletter), the MSIT changed its standards again, with effect from March 6, 2020, so that interconnection between same-tier ISPs need not invariably be for paid settlement, and rather the MSIT may allow settlement-free basis for some level of volume. At present, settlement-free interconnection is allowed among the 1st tier ISPs, namely SK Broadband, KT and LGU+ (for up to a 1.8 ratio of volume used by a fellow 1st tier ISP). (See MSIT release of March 31, 2020.) There is speculation that this shift may help ease or lessen an upward drift in connectivity fees.

2.       Telecom, connectivity: Key online sector law is amended to add express extraterritorial jurisdiction clause (in case of “impact on domestic market or users”), as new requirements are imposed on major online service providers to block illegally filmed content and appoint an in-charge for this purpose.

May 2020: On May 20, 2020 the National Assembly passed amendments to a key connectivity law, the Act on Promotion of Information and Communications Network Utilization and Data Protection, Etc. (the IT Networks Act or ITNA),to require online service providers to take some scope of measures to block and delete illegally filmed content, while adding an express provision for extraterritorial jurisdiction over ITNA compliance matters in case of local “impact”. Progressed quickly in the wake of the “Nth Room” scandal, which involved grievous sexual exploitation via a chat room of the Telegram messenger app, the ITNA amendments will take effect in late 2020, probably in early December, though the exact date is yet to be fixed. Related requirements, to be imposed on online services meeting certain thresholds of scale, will include appointing of a person in charge of these issues, and filing of an annual report on compliance and related data. Violations are to be subject to administrative fines. The amended provisions do not, by themselves, spell out the concrete scope of measures to be taken, and these must await implementing regulations to be drawn up in the coming months. According to their terms, these monitoring requirements would appear to apply only to video content that involved sexually exploitative filming, and not apply, for example, to hate speech or libel.

The added extraterritoriality clause, however, would evidently be of general application. According to the clause, obligations and restrictions under ITNA will apply “to activity taking place overseas that has an impact on the domestic market or users.” In other words, while the insertion of the jurisdictional clause at this juncture was inspired by outrage over unlawful videos in particular, the clause taken literally will extend the broader scope of ITNA restrictions, including data protection provisions, to foreign online services, so long as these have a local impact. In fact, regulators had already espoused an expansive view of the jurisdictional reach, and to some extent this is embodied, for example, in the ITNA requirement upon major foreign-based online services to appoint a local representative. But it would seem possible that the added clause may have some impact on the monitoring and policing of, not only illegal video content, but also other aspects of ITNA compliance, going forward. (The introduction of an extraterritoriality clause, including for broader purposes of efficacious regulation, had been in discussion for some time – see e.g. news of proposed legislation in our August 2018and October 2018newsletters.)

At any rate, not all offshore services that see local usage will be subject to the requirement to appoint an in-charge, and to file compliance-related reports. For offshore as well as domestic services, these requirements will apply only to those services that meet certain thresholds, to be determined in the follow-on regulations, including in terms of metrics like user numbers, traffic volume and type of service.

3.       Mobility, gig economy: Further developments point to extension of employee benefits to platform-based workers.

New drivers’ union says it will sue the Tada van ride-hailing app to seek classification of the drivers as employees.

Labor ministry plans to extend employee insurance coverage to delivery workers and other gig workers, if in near-exclusive roles for their app platform.

April – May 2020: Further developments mark significant, if disjointed, efforts toward bringing “gig economy” workers, and especially drivers and delivery workers, within the coverage of important employee benefits in Korea. On April 27, 2020, the Seoul metropolitan government granted labor union recognition to the “Seoul Platform Driver Union”, formed by ride-hailing platform drivers. (See e.g. this local news report.) The union is said to accommodate and welcome sign-up by gig economy drivers of all descriptions (including freight drivers as well as drivers for ride hail apps). One of its first stated aims is to sue the van ride-hailing app Tada, to seek a ruling that Tada drivers are “employees” of the operator, entitled as such to protections and benefits of employees under the Labor Standards Act. (A Tada driver previously filed a similar suit, which was rejected on the facts in that case such as the infrequency of his Tada driving, as reported in our February 28, 2020 newsletter.) The new drivers’ labor union becomes the second official union organized for gig economy workers, following the city government’s approval, in November 2019, of the “Riders Union” set up by delivery service workers. (The Riders Union’s original application was covered in our June 24, 2019 newsletter.)

Meanwhile, on May 17, 2020, a week after a broad pledge by President Moon to expand employment insurance coverage, the Ministry of Employment & Labor announced that it plans to enable enrollment in the national employment program, starting in 2021, by “special type” workers whose situation is near to working exclusively for the hiring party. The class of qualifying workers has yet to be defined clearly, but it would very likely cover, for example, app service-based delivery workers (the specific example cited by a key ruling party legislator for labor matters). A first step would be to amend the Employment Insurance Act, so as to include “special type” workers in the national program, in which contributions are generally borne 50:50 between employers and employees (or workers, at any rate). An issue left open for now is whether to allow qualifying platform workers to “opt-out” from the program.

These latest developments follow a seeming trend toward treating gig economy workers in the same or similar way as employees. As noted above, a deliverers’ labor union was approved in late 2019. Also last year, pursuant to a Supreme Court decision, and amended regulations under the Industrial Accident Compensation Act, “special type” workers including deliverers became entitled to enroll (with right of opt-out) in the national workmen’s compensation scheme. Separately, the Industrial Safety & Health Act was amended to impose safety standards, from January 2020, on businesses using certain types of platform-based workers. While a Tada driver’s claim for employee status was rejected in February 2020 (as noted above), the MOEL ruled in November 2019 that a group of delivery workers, for the Yogiyo food delivery app, were effectively employees, and as such entitled to overtime pay. (See our report on the MOEL finding.)

4.       Mobility: Milestones for autonomous vehicle development with launch of framework towards commercial roll-out of “Level 4” by 2024, and regulatory sandbox permit for self-driving delivery and surveillance robots.

May 2020: As reported in our separate bulletin, Korea launched its national framework for development and commercialization of self-driving cars, or autonomous vehicles (AVs). Originally passed in 2019, the Act on Promotion and Support of Commercialization of Autonomous Vehicles (AVA) was fitted with its main implementing regulations in April 2020, and came into effect on May 1, 2020. The AVA lays a statutory base for building self-driving car infrastructure, and gives administrative authority, to the Ministry of Land, Infrastructure & Transportation (MOLIT), to designate “testing zones” for higher autonomy AVs, including to supplement supporting systems and mapping, as well as to designate “self-driving sections” or stretches of public roads. Ancillary rules concern minimum insurance coverage in testing zones, and allow for latitude in use of personal data so long as anonymized (although the scope of allowed use is left imprecise, as noted in our bulletin). Seen alongside plans unveiled by the MOLIT in October 2019, the new framework contemplates full road access for “Level 3” (extensive but conditional autonomy) and up to “Level 4” (high autonomy) cars by 2024. As a first major step, MOLIT is slated to designate initial AV testing zones by November 2020.

Coinciding with the launch of the AVA framework, the government has granted regulatory sandbox clearance for a business that plans to put self-driving robots on sidewalks, for delivery and security maintenance purposes. (See this government announcement.) Taking advantage of the regulatory sandbox framework that was beefed up in early 2019 (noted in our summary report at the time), the business model, as approved by the ICT Regulatory Sandbox Commission, will be exempted for 2 years (extendable once, for the same duration), from regulations that would otherwise bar robots from pedestrian paths, and also exempted from restrictions on use of personal data (images of passersby and so forth) under the data privacy laws, subject to certain conditions to better assure safety and security.

5.       Patent law: Korea amends patent law to widen scope of available damages for infringement based on infringer’s profits, by removing anchoring to right holder’s manufacturing capacity; however, impact is unclear in light of Civil Code principle for recovery.

May 2020: Korea has passed an amendment of the Patent Act, to take effect in late 2020, aimed at expanding the scope of compensation available for infringement. Under current Patent Act Article 128(4), among the possible methods for determining damages for infringement, in case of intentional or negligent infringement, profits earned by the infringing party are “presumed to be the loss incurred by the patentee or exclusive licensee,” but this is a rebuttable presumption: Because the Civil Code in general does not allow damages beyond a claimant’s actual losses, an issue is that, if the infringer can show that the right holder’s actual loss was less – in particular, by virtue of its limited manufacturing capacity –, then the damages are confined to that lesser amount. On May 20, 2020, the National Assembly amended Article 128(4) to add the proviso that, for this purpose, the right holder’s “capacity to practice the patent shall not be taken into account.” Thus, under current law, if the infringer made 10,000 infringing units of a product, while the right holder’s smaller factory could in any event have made only 1,000, then damages available, if based on the infringer’s profits, are confined to the 1,000. (Still, other headings of recovery may be available for the 9,000, e.g., reasonable royalties or the right holder’s lost profits, but those will often not rise to the infringer’s profits.) Under the amended Patent Act, in contrast, the right holder may seek, as damages based on the infringer’s profits, the amount corresponding to all of the 10,000 units. The amendment will probably take effect by early December 2020 (that is, 6 months from formal promulgation, which will likely come by early June), and govern infringement suits that are started after then.

The amendment will clearly have significance for patent litigation going forward. But a question is whether the Civil Code principle, confining compensation to actual loss, can continue to be relied on by infringing parties, in order to disassociate damages from their own profits, and instead limit compensation, if any, to the right holder’s potential profit or reasonable royalties, which are alternate bases for damages under Article 128. As a sign of the difficulty, an intermediate bill had proposed to define the compensation as consisting in the infringing party’s profits, by definition, not just as a rebuttable presumption, but that version of the bill was scrapped in view of the Civil Code issue. The presumption of right holder’s loss consisting in infringer’s gains remains rebuttable, only not by citing the right holder’s production capacity limits. The ultimate impact of the amendment is far from clear, at present.

This latest amendment of the Patent Act, seen alongside the amendment (effective in 2019) that instituted treble damages for willful infringement, appears to signify an ongoing push by lawmakers to impose stronger curbs on such infringement.

6.       Mobility: Amendments to transportation law set up framework for taxi hailing platforms, while “Tada banning” provisions will restrict the popular van-hailing app; regulatory sandbox applications approved.

March – April 2020: As reported in our separate bulletin, amendments to the Passenger Transport Service Act (PTSA) were passed on March 7, 2020, to lay the regulatory framework for app-based taxi hailing or “platform taxi” businesses, which will involve several possible business models (subject to government control and oversight), including platforms based on tie-ups with existing taxi fleets and independent operator taxis, or taxi-rider matching (“intermediation”) open platform businesses. The same set of amendments, however, will operate to preclude the popular Tada van-hailing app (which relied on short term rentals) unless Tada were to opt for the most regulated business model, a taxi-like enterprise that entails significant contributions to a public fund (which Tada has said is unacceptable). The platform taxi regulations are set to take effect on April 8, 2021 (except for certain restrictions pertaining to the Tada business model that will take effect in October 2021).

Meanwhile, a couple of proposed businesses relying on the use of rental cars of paid transport, whose legality (like Tada’s) might otherwise be vulnerable to challenge, applied for, and in May 2020 obtained, regulatory sandbox approval to operate till the amended PTSA takes effect, and for a 6-month window thereafter. (See e.g. this government press release.) The two approved business models involve, variously, trial operation using a limited number of vehicles (300), or advance booking of pick-up times and up-front payment based on route. However, as a condition of the sandbox clearance, each business will have to convert eventually to one of the “platform taxi” models (see above).

7.       Telemedicine: Korean government allows partial exceptions from prohibition of telemedicine, including emergency steps amid COVID-19; situation renews public debate over telemedicine regulation.

February – May 2020: As the COVID-19 situation has unfolded in Korea, the government has taken steps allowing for expedient departures from the general restriction on telemedicine. The Medical Services Act (MSA) prohibits telemedicine, or the direct treating of patients by physicians using telecommunication technology, apart from some narrow exceptions. However, recent months have seen significant exceptions and other steps to ease constraints under the MSA. (1) In late February, the Ministry of Health & Welfare (MOHW) adopted an emergency measure (in effect until cancelled) to allow physicians to consult with patients and prescribe medication over the phone, where it is safe enough to do so, in the physicians’ judgment; prescriptions so prepared can be emailed (or faxed) to the pharmacy, which can in turn coordinate with the patient by phone or email. (See e.g. this local news article.) (2) Also in February, the MOHW issued an important, though limited, ruling concerning remote monitoring of patients via wearable devices: The MOHW confirmed that the MSA did not prohibit a physician from advising a patient (by phone or email), based on data from such monitoring, to go to a hospital – although, given the MSA restriction, the physician must not, in that manner, explain the need for going to the hospital. (See this news article.) (3) As an existing exception under the MSA, the government had designated a “Special Regulation-Free Zone for Digital Healthcare” in rural Gangwon-do province, to allow telemedicine services for people in that region (in particular, patients with chronic illnesses, and in certain other situations). In scope and practice, the program was desultory. But in May the government, prompted by the renewed exigencies of care for people in hard-to-reach places, expanded the program to include a number of additional hospitals, and undertook to re-energize the effort. (See this news article.)

Along with these developments, Korea has seen high-profile calls for changes to the regulatory framework, to allow wider room for telemedicine, including statements by the head of the Presidential Committee for the 4thIndustrial Revolution, an important policy-forming body, and the head of Seoul National University Hospital. (See e.g. this news article.) These views have met opposition, however, from the Korean Medical Association.

Short notes

8.       Apps and online services: First court decision imposing criminal penalties on “web crawling” – February 2020: Finding violations of copyright as well as connectivity laws, on February 11, 2020, a Seoul court imposed criminal penalties on “With Innovation”, provider of a hotel booking service app, for “web crawling” – that is, using bots to scrape data from – a competitor’s website, mobile app and API server. This is apparently the first case in Korea that resulted in criminal sanctions for such activity. (See e.g. this local news report.) The court ruled that the scraping of information, including names, addresses, room types etc. of hospitality industry business partners, constituted unlawful copying of database, in violation of the Copyright Act. In addition, the court found that the company, using false information, gained unauthorized access to the competitor’s server, in violation of the IT Networks Act.

9.       Mobility (micro-mobility): Amendment of transportation law eases restrictions on e-scooter riding – May 2020: Existing restrictions on use of e-scooters under the Road Traffic Act (RTA), including the requirement of a driver’s license, are set to be relaxed in late 2020. As reported in the local press, on May 20, 2020 the National Assembly passed a set of amendments to the RTA newly classifying motorized scooters as “personal mobility devices”, permitted to be used without need of a driver’s license, and on bicycle lanes, so long as the scooter’s maximum speed is 25 km/hour and the weight is less than 30 kg. (See e.g. this local report.) The amended law is expected to take effect by early December 2020 (depending on when the amendment is formally promulgated). Certain constraints will stay in place. Among other things, as before, motorized scooters are not allowed on sidewalks, though that may be a common sight in some areas.