As the provision and consumption of digital content-related services are rapidly increasing worldwide and the influence of online platforms is growing, the Government is seeking to amend the Civil Code to newly establish a comprehensive provision that can regulate digital content agreements as discretionary.  Additionally, it has announced a development plan that includes key tasks in the digital platform sector.

On December 1, 2022, the Ministry of Justice (the “MOJ”) announced a proposed amendment to the Korean Civil Code (the “Proposed Amendment”) to introduce a “Digital Content Contracts Act” that regulates transactions involving digital contents and related services (the public comment period for the proposed amendment ended on January 10, 2023).

Although the Proposed Amendment has the nature of a discretionary provision, it may be taken into account when regulatory authorities review the companies’ terms and conditions or enforce individual laws and regulations, and it may serve as a judgment basis for the courts and relevant authorities in user disputes.

In addition, on December 29, 2022, the Government announced the “Digital Platform Development Plan,” under the supervision of the Ministry of Science and ICT (the “MSIT”), to create an innovative and fair platform environment.

As a part of a series of follow-up measures to the President’s New York Initiative announcement on September 21, 2022, the Digital Platform Development Plan contains various policies applicable to platforms, including self-regulation.

1.   Key Details and Implications of the Proposed Amendment to the Civil Code to Introduce the Digital Contents Contract Act
 

• (Definition of the Digital Product Provision Agreement) The Proposed Amendment adds the “Digital Product Provision Agreement” as one of the typical agreements under the Civil Code, and defines it as “an agreement under which one party provides the other party with content (digital content) produced and supplied in digital form or with services related to the production, processing, storage, access and distribution of such content (collectively referred to as “Digital Products”) and the other party pays for the use thereof.”

Although the scope of the Proposed Amendment is unclear, it may be interpreted that the Proposed Amendment applies not only to typical content and related services but also to app markets, cloud services, and social media services.

In addition, since the concept of “compensation” rather than “payment” is used, there is room to interpret that the amendment may be applicable to cases where personal information is provided in return instead of money.  Furthermore, since the users of digital products are not limited to individuals, it is also necessary to pay attention to service providers that specialize in B2B services.

• (Obligation to provide and maintain quality) The Proposed Amendment obligates the provider to distribute digital products with “reasonable functionality and quality” and to take “reasonable complementary measures” to maintain them.

The MOJ has stated that the specific level of functionality and quality that are deemed “reasonable” will gradually be specified in the future through court precedents and trade practices.  Further, there is room for different interpretations of abstract concepts such as the period for taking the aforementioned “reasonable complementary measures.”

• (Establishment of a separate warranty provision for digital products) The Proposed Amendment recognizes a user’s right to claim against the provider with respect to defective digital products, and extends the warranty period to two years (the current Civil Code mandates a warranty period of up to one year).

Considering that the scope of the obligation to provide and maintain quality can be broadly interpreted and applied, there is a possibility that the number of cases where the user may seek to hold the provider liable for warranty on the grounds that the relevant obligation was not fully performed will increase.  In particular, since the user is not required to prove the intention or negligence of the provider under the warranty liability, it is expected that the cost and efforts that the provider will have to undertake to respond to disputes will be greater.

• (Regulations on legal relations between the parties following the termination of an agreement) The Proposed Amendment prohibits users from using digital products and providing them to a third party after the termination of an agreement.  It also prohibits the provider from using the content created in the process of using digital products but allows additional use if the user’s consent is obtained or the provider or a third party has a legitimate use for the content.  The former is likely to be particularly meaningful in contracts for the provision of videos, music, software, etc. that have “special characteristics of non-exclusivity, ease of reproduction and post-utilization,” and the latter is likely to have a more direct impact on services where user-generated content (“UGC”) is created.

• (Digital product provider’s right to change the product in ongoing provision agreements) According to the Proposed Amendment, the provider of an ongoing provision agreement may exercise the right to change the digital product only if (i) the possibility of such a change was reserved at the time of executing the agreement, (ii) there are reasonable grounds for such change, and (iii) the purpose and details of the change were notified to the user before a considerable period of time.

However, even in such a case, if the user’s interest in using the digital product is infringed due to the change in product, the user may terminate the contract within a reasonable period of time.

The current Act on Regulation of Terms and Conditions provides that “a provision that grants a business entity the right to unilaterally determine or change the details on the benefits without reasonable grounds” is invalid.  However, the Proposed Amendment regulates the change itself and requires certain reasons for the change.

Furthermore, the degree of change in digital products subject to the provision above is unclear, and it is also unclear where the user’s “interests in use” are infringed, which is a requirement for the user’s right to terminate.  Therefore, the amendment is likely to lead to increased users’ claims for termination and disputes over whether the providers’ change(s) of digital products was lawfully made.
 

2.   Key Contents and Implications of MSIT’s Digital Platform Development Plan 
 

The MSIT’s Digital Platform Development Plan includes nine key challenges based on three principles: (i) Innovation and Global Reach, (ii) Autonomy and Fairness, and (iii) Trust and Inclusion.

The following describes the key issues and details that may directly affect broadcasting and telecommunications service providers:
 

In order to ensure the smooth implementation of the Digital Platform Development Plan, the government announced that it plans to continue reviewing its implementation status through the Pan-Government Platform Policy Council and strengthen cooperation by measures such as supporting private platform autonomous organizations.
 

The MOJ plans to finalize the proposed amendment to the Civil Code in early 2023 and submit it to the National Assembly based on comments collected within the public comment/pre-announcement period.

In addition, as the key policies of the Digital Platform Development Plan are expected to be specified and implemented by the relevant ministries, it is necessary to further inspect the individual implementation plans to be discussed in the future and the progress and schedule of each ministry.  In particular, as the Digital Platform Development Plan includes not only support measures for platforms but also a number of regulations that are practically specialized for platforms, it is necessary to closely examine relevant trends and actively follow up on the possibility of introduction of additional regulations and obligations.

[Korean Version]