Friday, October 21, 2016

Changes Induced by Open-Ended Fair Use Clause: Korean Experiences

[Also posted at http://infojustice.org/archives/37215]

South Korea has a civil law tradition based on the modern European civil law systems. The civil law tradition was one of the obstacles when civil societies and lawmakers tried to introduce flexible and open-ended fair use exceptions into the Korean Copyright Act (“KCA”) in 2005 and 2009. According to opposers, the fair use doctrine, developed under the rules of equity in common law countries such as the U.S., did not fit with the Korean civil law system.


The Korea-US FTA (“KORUS”) cleared this obstacle, but KORUS does not mandate introduction of the flexible fair use provision. It only leaves a margin for it with two restrictions: in connection with the reproduction right expanded to cover “temporary storage in electronic form;” and qualifying the fair use exception by referring to the three-step test (Footnote 11 of Article 18.4(1) of KORUS). So the Korean fair use clause was drafted by combining the US style fair use (17 U.S.C. §107) and the three step test.


Before the enactment of the fair use clause, the most commonly relied-upon defense to a claim of copyright infringement were the specific limitations for quotation and private use. However, both were codified in restrictive terms and courts interpreted them narrowly. First, to be a permitted quotation, a so-called “master-servant relationship” has to be met. The condition of master-servant relationship was developed by the Korean Supreme Court from 1990s modeled on Japanese case laws. It requires that “the quoting work is superior, while the quoted work is subordinate.” Therefore, reproducing the whole or a substantial amount of a work is excluded from the permitted quotation. The Supreme Court later relaxed the master-servant relationship by legitimating reproduction of thumbnail images by search engines (2005Do7793, February 9, 2006). However, the scope of quotation is still restrictive enough to ban the reproduction of entire work e.g., for purposes of obtaining a marketing approval from food and drug authorities (see Lyprinol case below). Second, under KCA, the private use exception is only allowed when the use is not-for-profit and takes place in a limited space like the home, excluding every use on the Internet. Furthermore, the Korean courts have long denied a general, expansive interpretation of specific limitations such as quotation and private copying. The open-ended fair use clause induced, albeit slowly, changes the judicial practices.


Fair-Use Clause in Korean Copyright Act


The fair use clause is codified in Article 35ter KCA, which consists of two paragraphs. The first paragraph sets forth circumstances where general exceptions for fair use are applied and the second paragraph provides elements to be considered in determining whether a certain use is fair.


Article 35ter (Fair Use of Works)
(1) Notwithstanding Articles 23 to 35bis and 101ter to 101quinquies,[1] it is permissible to use works [for news reporting, criticism, education, research, etc][2] when such use does not conflict with the normal exploitation of works and does not unreasonably prejudice the legitimate interests of rights holders.
(2) In determining whether an act of using works falls under Paragraph (1), such factors as provided in the following subparagraphs shall be considered:
1. The purposes and characters of the use, including whether or not such use is for profit;
2. The category and nature of the works;
3. The amount and substantiality of the portion used in relation to the whole work; and
4. The effect of the use on the existing or potential market or value of the work.
[Article added on December 2, 2011 and amended on March 22, 2016]


Lyprinol and Rosehip - Photocopying an Academic Article for a Marketing Approval of Functional Food


In a criminal case, the Korean Supreme Court ruled that reproducing and submitting a medical article to the Korea Food and Drug Safety Authority (KFDA) constitutes a copyright infringement (2011Do5835, February 15, 2013). In upholding the appeal court’s sentence of a fine of KRW two million (approximately USD 2,000), the Supreme Court found that photocopying an entire medical article and submitting it to KFDA when applying for a marketing authorization does not fall within either the quotation or the private use exception.


lyprinol-logo.pngThis case involves a health/functional food, called Lyprinol, a natural marine lipid extract having an anti-inflammatory effect. From 2001, Pharmalink International Limited of Australia (“Pharmalink International”) sold Lyprinol through SYS Pharm, an exclusive distributor in Korea. SYS Pharm, before obtaining the KFDA’s approval, requested a clinical study by seven medical doctors, and the result of study they conducted on 54 arthritic patients for two months was published in a medical journal, called New Medical Journal, in May 2002. When the contract between Pharmalink International and SYS Pharm terminated in May 2008, Pharmalink International established its own Korean branch to import and sell Lyprinol (effective May 22, 2008). In August 2008, Pharmalink Korea applied for KFDA’s approval of the product-specific health/functional food. Pharmalink Korea copied the whole article without permission of the authors or the journal publisher and included it in its KFDA submission. Against this, the CEO of SYS Pharm filed complaints to the Prosecutor’s Office on August 14, 2009 and November 4, 2009.


If the unauthorized reproduction of an academic or medical paper in order to obtain marketing approval from food and drug authorities is entirely banned by the copyright regime, it will lead to unintended consequences: unduly over-protection of test data on pharmaceuticals; and extension of the term of data exclusivity to life plus seventy years. Without considering this impact, the Korean Supreme Court dealt with this case from the microscopic legal interpretation of KCA. First, the Supreme Court made clear that the principle of general fair use was not allowed in the previous KCA as it only provided individual cases where the copyright was limited. Concerning the pleading based on the quotation exception, the Supreme Court repeated the precedent ‘master-servant relationship.’ And the private use exception was also rejected because the court viewed the reproduction of a medical article for a marketing approval was a for-profit use, and did not take place in a limited space like the home.


This ruling has far-reaching implications to access to medicines, because it delays generic entry. But the flexible fair use clause may play a role in addressing the problem, as shown in Rosehip case.


hyben_logo_APS.png The factual background of the Rosehip case is the same as that of the Lyprinol case. Hyben-Vital of Denmark has produced rosehip, an ingredient in skincare and having an anti-inflammatory effect. A Korean exclusive seller (whose name is unknown) submitted a medical article published by Scandinavian Journal of Rheumatology Vol. 34, No.4 (2005), to KFDA for obtaining an approval of the functional ingredient of the health/functional food in 2007. The article was drafted by three doctors upon request of the study of Hyben-Vital. Another Korean company (whose name is also unknown) planned, in 2012, to import a rosehip ingredient from Chile and downloaded the whole article on the Internet and submitted it to KFDA for a functional ingredient approval on June 5, 2012. Against this, the authors, having known the unauthorized reproduction of their article in August 2013, granted Hyben-Vital a power to file a criminal complaint, which was in turn transferred to the Korean exclusive seller. The formal complaint was filed in April 20, 2015.


In August 18, 2016, the Suwon district court found that the act of downloading and printing the medical article by the accused breached the authors’ reproduction right, and its submission to KDFA infringed the authors’ distribution right (2016GoJung432). Nonetheless, the court viewed that the accused was allowed under KCA to quote the article in a process for obtaining KFDA’s marketing approval in consideration of fair use clause under Article 35ter and the public nature of the academic article. Also, the Rosehip court held that the act for obtaining marketing approval is not for-profit. Unlike the Lyprinol court, the Rosehip court narrowly interpreted “for profit purpose” as referring to “for purposes of obtaining illegal profit paid directly from infringing act.”


Online Use of News Articles and Photos


apollo17_earth.jpgAn NGO called the Citizens Action Network (CAN) made use of photos in several blog articles at http://actiontoday.kr. The blog articles were drafted by volunteer citizens and activists to encourage people to act for public values such as democracy, sharing, peace and protection of the environment. They chose the photos by searching images on the Internet. (While some were actually copied, others were linked - copyright infringement of linking, directly or indirectly, has been entirely denied by the Korean supreme court in at least four cases). In 2011, a Korean agency of Getty Images sent CAN a warning letter alleging that ten photos used in the blog articles infringed their copyrights, including this and this, and demanded  a monetary settlement of around KRW 1.5 million, which was calculated based on their own price schedule. In this course, the agency threatened CAN a possible civil litigation claiming damages of ten times the price schedule. Surprisingly enough, one of the photos the copyright holder alleged was the image of planet earth, which is the same picture available on NASA web site.


Finding CAN guilty, the Seoul district court did not apply the open-ended fair use clause because the infringement occurred prior to the its enactment (Seoul Western District Court, 2012GoJung1591, November 1, 2012). Furthermore, the court rejected the CAN’s pleading that the photos were used for educating people and held that such a use conflicted with normal exploitation of copyrighted pictures. Fortunately, however, the court suspended a sentence of KRW 7 million by taking into account of the non-for-profit nature of the blog and CAN’s swift deletion of all of the photos upon receiving the warning letter.


Since the enactment of fair use clause, Getty Images and copyright holders did not stop widespread threatening copyright infringement against users who have unconsciously used photos available on the Internet.


In August 2014, another Korean agency of Getty Images alleged copyright infringement by an NGO called Women Link for using an image in a blog posting (see below). The blog dealt with the social problem of the career disruptions of female workers, and included an interview with a CAD designer (this was the reason for use of the photo at issue). The copyright holder asked a money settlement of KRW 1.2 million, sixfold higher than price schedule. Soon after Women Link refused the proposed settlement, the agency submitted a criminal complaint. But in December 2014, the prosecutor’s office decided not to prosecute by applying the fair use clause (Seoul Western District Prosecutors Office, 2014HungJe47463, December 22, 2014). The prosecutor found that the photo is copyrightable (Open Net, representing Women Link, argued lack of intellectual creativity in the photo) and Women Link had constructive knowledge that the images had been made available online without Getty Images’s copyright notice, and had been shared without the copyright holder’s authorization. Nonetheless, the prosecutor decided the use of image by Women Link was fair use because: (1) the purpose of use was non-for-profit; (2) the used image was small and lower quality than original picture (a sort of thumbnail image as the size of the used image was as small as 1/70 of the original); and (3) there was little likelihood of damage to the value the of copyrighted images.


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In February 2014, an unprecedented accusation of copyright infringement was filed with the Prosecutor’s Office. It involved 270 lawmakers, as many as three-fourths of total members of the Korean National Assembly. This action was planned by consumer groups to alert misuse of criminal enforcement of copyright holders. The lawmakers were accused of habitually re-posting news articles they regarded relevant to their legislative activities on their own websites. But in July 2014, the Prosecutor’s Office cleared the suspicion by applying the fair use clause: the re-posted news articles on the legislators’ websites were not in competition with commercial news services, and had little impact on the existing or potential market of copyright works.


These were landmark decisions by the criminal authority given that KORUS mandates South Korea to “strengthen enforcement of IPRs in Korea” and establish “a joint investigation team for an effective enforcement against online piracy.” It didn’t take long to get the same conclusion from the court.


In June 25, 2015, the Seoul Western District Court upheld the fair use defence again in a copyrighted photo case. This ruling was supported by the appeal court (Seoul Western District Court, 2015Na33407, November 26, 2015). In this case, the copyright holder was Image Making, one of the notorious copyright trolls in Korea. The defendant was a peace movement NGO called Without War. For using a photo of slice raw flatfish in a blog posting  (see below), Image Making demanded, in a civil litigation, damages of as much as KRW 2 million (according to its price schedule, the retail price was KRW 300,000).
In upholding all of the lower court’s reasoning, the appeal court found that the use was a fair use under Article 35ter. Concluding non-infringement, the court considered such factors as: (1) the purpose of the use was not-for-profit, to encourage a vegetarian diet; (2) the photo used in the blog was not substantial; (3) the potential impact on the market or business of the copyrighted work would be small because the main customers of the photo at issue would be advertising companies and restaurant businesses; (4) there was no copyright notice on the photo, making difficult for Without War to recognize the existence of copyright; (5) the degree of creativity of the photo was low; and (6) the used photo was of lower quality than the original. (The lower court first ordered a reconciliation of money settlement that the defendant pays half of the retail price (KRW 150,000). But OpenNet, representing the defendant, Without War, raised an objection to this order and asked the court to render a formal decision.


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The fair use clause is not a universal key for exoneration from copyright infringement. In other cases, the Korean courts did not buy the fair use defense. For instance, when a liquor wholesaler posted news articles for the exclusive use of its employees, the court held that it conflicted with the normal exploitation of works and unreasonably prejudice the legitimate interests of copyright holders (Seoul Central District Court, 2013Na36100, February 11, 2014). Furthermore, when a company produced audiovisual materials for an online lecture in which textbooks sold by the plaintiff were used, the court did not view it fair use because the textbooks were used for-profit and their potential market value would be substantially undermined (Seoul Central District Court, 2012GaHap541175, February 12, 2015). However, it is fair to say that the open-ended fair use clause has guided courts to recover the broken balance between the right holders and users.




[1] Articles 23 to 35bis contain specific limitations of copyright in general and Articles 101ter to 101quinquies contain specific limitations of copyright in computer programs. They include limitations for internal use in legislative and administrative bodies and in judicial proceedings, free use of government works, quotation, public performance and broadcasting for non-profit purposes, private use, use in libraries and educational institutions, use for visually impaired persons, and decompilation of program codes.
[2] The non-exhaustive list of purposes of use in brackets was deleted in the amendment of March 22, 2016 for fear of a restrictive mis-interpretation that fair use is allowed only for the listed purposes. The English text of Korean Copyright Act is available at the website of the Ministry of Government Legislation, which is full of rubbish translation of original Korean text. More accurate English version is found at WIPO. But this also contains translation errors. First, it translates the bracketed language as if it is exhaustive. Second, the English text of WIPO may cause a confusion in the relationship between the fair use clause and the other provisions for specific limitations (Articles 23 to 35bis and 101ter to 101quinquies). From the translated text, it appears that the open-ended fair use clause is not applied in certain cases specified in Articles 23 to 35bis and 101ter to 101quinquies. But under Korean text it is clear that the fair clause does apply.