In the aftermath of the recent passing of the author of the cartoon Black Rubber Shoes (Korean romanization: Geomjeong Gomusin) following a copyright dispute with his publisher, there have been increasing calls for improved protection of authors’ rights.  In response, the Culture, Sports and Tourism Committee of the National Assembly passed a resolution on the Legislative Bill on Creating a Fair Distribution Environment of Cultural Industries (the “Bill”) at its plenary session on March 29, 2023.  The Ministry of Culture, Sports and Tourism (the “MCST”) announced its intention to pass the Bill by the first half of 2023.  However, the Korea Communications Commission and the Ministry of Science and ICT are known to have raised concerns regarding a regulatory overlap with the Broadcasting Act, Internet Multimedia Broadcasting Business Act, and Telecommunications Business Act.  The Culture, Sports and Tourism Committee passed the Bill noting that it will reevaluate the Bill if the relevant ministries reach a consensus.  Thus, we advise companies to pay close attention to the discussions among relevant ministries and consider submitting their opinions to the Legislative Judiciary Committee and the ministries if necessary.

Below is a summary of the key provisions of the Bill.

A.   Scope of Application
 

The Bill follows the Framework Act on the Promotion of Cultural Industries for key terms such as “cultural industries” and “cultural products” (Article 2 of the Bill).  These definitions cover the majority of cultural industries and cultural products, such as movies, videos, music, games, publishing, broadcasting, cartoons, advertisements, performances, digital cultural content, and user-generated cultural content.  As a result, the scope of the Bill partially overlaps with the Broadcasting Act and the Telecommunications Business Act, among others.
 

B.   Prohibited Acts, Including Prohibitions on Hindering Production and Forcing (Unfair) Transfer of IP
 

The Bill sets forth 13 types of prohibited acts, including: (i) hindering the production activities of cultural product manufacturers such as modifying the production direction or designating/replacing production personnel and (ii) forcing the transfer of intellectual property rights, acquiring them free of charge or distributing the profit gained from using intellectual property rights at a significantly lower level than normal trade practice.  These prohibitions are targeted at dissatisfaction with long-lasting content production practices, which recently led to civil lawsuits.  After the Bill takes effect, affected individuals will have a new route to challenge “unfair” content production/distribution practices with the MCST.  The Bill delegates the detailed implementation of these prohibitions to the Presidential Decree (Article 13 of the Bill).

In the event of violation of the aforementioned prohibitions, the MCST Minister may issue a corrective order (Article 15 (1) of the Bill), and failure to comply with the corrective order may result in imprisonment of up to two years or an administrative fine of up to KRW 150 million (Article 20 of the Bill).  However, if the MCST determines during its investigation that the act in question constitutes an abuse of market dominance or unfair trade practice under the Monopoly Regulation and Fair Trade Act, the MCST must request the Korea Fair Trade Commission to take necessary measures (Article 15 (3) of the Bill).
 

C.   MCST to Conduct Surveys of Cultural Industries
 

The MCST Minister shall regularly conduct surveys on the state of the cultural industries and their distribution environment (Article 9 (1) of the Bill).  To this end, the MCST may request businesses to provide materials, and businesses must comply unless they have a justifiable reason (Article 9 (2) of the Bill).  Failure to submit or submitting false materials may result in an administrative fine of up to KRW 10 million (Article 22 (2) 1 of the Bill).
 

D.   Obligation to Specify Certain Matters in Contracts and Obligation to Provide Contracts
 

The parties in a contract concerning cultural products will be required to stipulate certain items in the contract including: (i) the term, renewal, amendment and termination, (ii) the scope of the production/distribution service, (iii) the amount, the date, and method of payment, and (iv) any profit sharing arrangement.  In addition, the parties must exchange signed and sealed copies of the contract (Article 11 (2) of the Bill).  A party that fails to either include the required items or provide a signed/sealed copy of the contract to the other party may be subject to a corrective order by the MCST (Article 11 (5) of the Bill).  Failure to comply with the corrective order may result in an administrative fine of up to KRW 10 million (Article 22 (1) of the Bill).
 

E.   Deemed Compliance When Using Standard Contracts
 

The MCST recently announced that it would re-examine the terms and conditions of the 82 standard contracts in the 15 fields under its supervision.  Although companies are not required to use these standard contracts, they may be taken into consideration during the review of terms by regulatory agencies or in the enforcement of individual laws, and may also serve as a basis for judgment by a court or relevant ministry in consumer disputes.  The Bill also provides that a person who uses a standard contract under Article 12 of the Bill or any other law is deemed to comply with the obligation to specify the necessary matters  and the obligation to provide the contract to the other party as discussed in the Section D above (Article 11 (3) of the Bill).
 

F.   Obligation to Preserve Contracts
 

Cultural product business operators must preserve cultural product-related contracts for at least three years as prescribed by the Presidential Decree (Article 11 (4) of the Bill).  Any person who violates the above may be subject to an administrative fine of up to KRW 5 million (Article 22 (2) 2 of the Bill).
 

The Bill is expected to enter into force one year after the date of its promulgation (Article 1 of the Addenda).  If the Bill is passed by the National Assembly, companies may have to review their contracts and business practices, and monitor the MCST’s drafting of subordinate regulations and its review of the standard contracts, and provide their opinions as necessary.  Furthermore, as the MCST is likely to conduct large scale surveys before and after the Bill takes effect, companies are advised to respond appropriately.

[Korean Version]