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Target judgment: Supreme Court Ruling No. 2023Do17354 Rendered on April 16, 2024 (Construction Cost Database Case)
Summary
• Facts: The defendant instructed his employees to develop a program that mimicked a program called 'EMS7' produced by the victim's company, while copying the database of the victim's 'EMS7' program without the victim's permission, and then sold a six-month license for the unauthorized copy of the database for 120,000 won through his company's website from January to February 2018.
• Ruling: The lower court held, and the Supreme Court affirmed, that even if some individual elements in the victim's database constituted public data that anyone could access for free, the victim's database was created by systematically arranging the data separately purchased for a fee together with such public data by categorizing and compiling them into “materials” and “unit costs” items, and then subjecting them to the interpretation regarding standard specifications, and therefore the defendant's reproduction of a substantial part of the victim's database infringed the victim's right as a producer of database (reproduction right).
• Evaluation: This ruling follows the same legal principles as the previous Supreme Court judgment of May 12, 2022, No. 2021Do1533. The 2022 Supreme Court ruling is understood to be a ruling that protects the investment of the producer of database while also considering the social request for information sharing required in the information society. Unlike the 2022 Supreme Court ruling, the facts of this case involved copying the victim's database and selling it for less than one-tenth of the price, thereby unfairly harming the victim's interests. This case appears to be one where the considerations of the 2022 judgment, such as information sharing and prevention of restriction of competition, were hardly found.
1. Overview of the Case
The defendant instructed his employees to develop a program that imitated a program called 'EMS7' (hereinafter referred to as the 'Victim’s Program') produced by the victim's company, and then copied the database of the victim's 'EMS7' program (hereinafter referred to as the 'Victim’s Database') without the victim's permission, and sold a six-month license to use the unauthorized copy of the database for 120,000 won through his company's website from January to February 2018.
In response, the prosecutor filed charges on the grounds that (1) the defendant violated the victim's rights as a producer of database (specifically, the right of reproduction) by copying the Victim's Database without authorization for commercial purposes, and (2) the defendant infringed upon the victim's copyright in computer program by creating the defendant's program with similar functions and interface as those of the Victim's Program.
2. Analysis and Reasoning for Each Issue
2.1. Infringement of Database Creator’s Rights
In order to constitute an infringement of a database creator's rights, (1) the victim’s database and the victim must be a 'database' and a 'producer of database' under the Copyright Act, respectively, and (2) all or a substantial part of the victim’s database must be reproduced, distributed, broadcast, or transmitted.
2.1.1. Determination of Database and Producer of Database
The victim's database is mainly composed of 'materials' and 'unit costs.’ 'Materials' refers to all material costs, labor costs, and expenses , etc. used in construction work, while 'unit costs’ refers to the remuneration and usage fees calculated by taking into account the required quantity per unit of construction of materials, labor, equipment, etc. to carry out a specific construction project, etc., time spent, and construction conditions , etc. – in a simple term, price per unit.
The data in the “Materials” of the victim's database is a monthly update of three types of price information: (1) prices published by the Public Procurement Service, (2) transaction prices from the Korea Construction Association, and (3) price information from the Korea Institute of Applied Statistics, of which (2) and (3) are data obtained through paid subscriptions. To build this database, the victim hired specialized employees in each field, including architecture, civil engineering, machinery, and electricity, etc.
The data in the “Unit Costs” is based on the “Standard Construction Specifications” published by the Korea Institute of Construction Technology, under the Ministry of Land, Infrastructure and Transport (MOLIT). However, it is not possible to create unit costs by copying the standard construction specifications, but requires a process of combining, interpreting, and applying those data by professional staff. The victim constructed the “Unit Costs” database by entering formulas and numbers derived from interpreting the standard specifications, along with other data collected to calculated construction costs.
Considering these circumstances, the lower court held, and the Supreme Court affirmed, that the victim’s database was a compilation of tens of thousands of elements arranged or organized in a systematic manner and that individual elements could be accessed and searched through the victim’s program, thus constituting a “database,” and that the victim was a “producer of database” because it had made significant investment in both human resources and materials in the creation of the victim’s database. In particular, public data, such as prices published by the Public Procurement Service and standardized specifications, which are available to the general public, were also systematically arranged through the victim's interpretation and thus constituted components of a protected 'database' in determining whether the rights of the producer of database were infringed.
2.1.2. Reproduction of a Substantial Part of the Victim's Database
The defendants admitted to copying the victim's database during the investigation. According to the evaluation of the Korea Copyright Commission, the defendant's database has “90% similarity in table names, 98.2% similarity in schema, and 90.4% similarity in data” to the victim's database, and also contains “typos, errors, duplicate entries, and data provided only to the victim's company from a certain company” in the victim's database. Given the defendant's testimony, the presence of common errors, the data similarity of over 90%, and the high similarity of table names and database schema, it appears that the defendant copied the victim's database entirely. The lower court found, and the Supreme Court affirmed, that the defendant had copied a substantial part of the victim's database, both quantitatively and qualitatively, and infringed the victim's rights as a producer of database.
2.2. Infringement of Copyright in Computer Program
This part of the indictment states that “the defendant copied the victim's program by creating the defendant's program by providing the same or similar functions as the victim's program and configuring the user interface to give users the same or similar impression as the victim's program in general,” but does not state that the defendant copied the source code of the victim's program. The lower court acquitted the defendant of this part of the indictment, finding that although it was admitted that the defendant's program was similar to the victim's program in terms of functions and screen configuration, the construction price program is a program that calculates by entering data such as standard specifications in accordance with the Public Procurement Service's integrated construction price calculation program and manual, so it cannot be said that there is creativity in the functions, menu configuration, interface, etc. of the victim's program. The prosecutor did not appeal this acquittal, so there is no Supreme Court decision on this point.
3. Flow of EU’s Database Protection Policy
The rights of a producer of database under the Copyright Act was introduced in 2003 referencing the EU's 1996 Database Protection Directive. The purpose of protecting rights of a producer of database is to encourage investment in the database industry by providing exclusive rights even to database lacking creativity. The EU Commission conducted evaluations of the Database Protection Directive twice, in 2005 and 2018, both of which concluded that there is no clear evidence that the Directive has contributed to the growth of the European database industry or an increase in database production, but that the current balance of stakeholders' interests does not favor repealing or amending the Directive. In this situation, the EU enacted the Data Act (effective January 11, 2024) to secure users' rights to access data and share data with third parties, and partially restricted the rights of database producers. Article 43 of the EU Data Act stipulates that the 1996 Database Protection Directive does not apply to data acquired or generated from a connected product or related service. This is to ensure service users' access to data generated by sensors and machines in the course of using services in IoT environments and rights to share it with third parties (mainly aftermarket operators who are SMEs). In addition, the Court of Justice of the European Union (CJEU) has issued a ruling that increased the burden for rights holders in proving database infringement (CV Online Latvia v. Melons, Case C-762/19, June 3, 2021). In this case, the CJEU held that database infringement through extraction and re-utilization is established only when such infringing activity deprives the database producer of economic benefits that would allow it to recover its investment. According to this ruling, the plaintiff (database producer) must further prove that the defendant's infringement deprives the plaintiff of the economic interest of recovering its investment. This ruling strongly suggests that the rights of the database producer must be properly balanced with the rights of users and third parties (competitors) to access and use the data. It seems to be a trend in EU database policy that, regarding the rights of database producers, such competition law perspectives should be taken into account in order to avoid possible data monopolies.
4. Significance of the Ruling
The follows the same legal principles as the Supreme Court's judgment of May 12, 2022, No. 2021Do1533. However, the 2022 ruling stated that (1) the information collected by the defendant from the API server of the victim company was part of the database related to the victim company's accommodation facilities. (2) The information was already well known, and it seems unlikely that it would have taken significant cost or effort to collect it, or it was already publicly available and could have been obtained through the app in this case, and there is no data on, inter alia, updating the database. (3) The court concluded differently from the ruling of this case by denying infringement of the database producer's right (reproduction right) on the grounds that the defendant's reproduction of the database was not considered to be in conflict with the victim company's normal use of the database or to unduly harm the victim's interests. The above 2022 ruling is understood to be a ruling that protects the investment of the database producer while also considering the social request for information sharing required in the information society. It can also be considered to be in line with the recent EU database policy in that it mentions information sharing and prevention of restriction of competition.
In order to find the significance of this ruling, it is necessary to comparatively examine the reasons for the acquittal in the 2022 ruling. This case also involved the use of public data, so there are similarities with the case of the 2022 ruling, which involved the collection of publicly available accommodation information, and from a competition law perspective, the defendant, a later market entrant, collected data of the victim, a first mover in the competitive market, on a large scale. However, in this case, the defendant copied and sold almost all of the “materials” and “unit costs” parts of the victim's database, which are the core of the victim's database; although there appears to be a significant amount of public data in the victim's database, there was a significant investment in both human and material resources in building the database, including the work of professional staff to compile, interpret, and apply the data after its collection, and the purchase and updating of some data for a fee; and the defendant in the case of the 2022 ruling appears to have collected the victims' data to develop his own sales strategy and did not resell, or provide to services, such data as is, whereas the defendant in this case copied the victims' database and sold them for less than one-tenth of the price. Therefore, it should be viewed as particularly prejudicial to the victims' interests, which differentiates this case from the case of the 2022 ruling. This case appears to be one where the considerations of the 2022 judgment, such as information sharing and prevention of restriction of competition, were hardly found.
Summary
• Facts: The defendant instructed his employees to develop a program that mimicked a program called 'EMS7' produced by the victim's company, while copying the database of the victim's 'EMS7' program without the victim's permission, and then sold a six-month license for the unauthorized copy of the database for 120,000 won through his company's website from January to February 2018.
• Ruling: The lower court held, and the Supreme Court affirmed, that even if some individual elements in the victim's database constituted public data that anyone could access for free, the victim's database was created by systematically arranging the data separately purchased for a fee together with such public data by categorizing and compiling them into “materials” and “unit costs” items, and then subjecting them to the interpretation regarding standard specifications, and therefore the defendant's reproduction of a substantial part of the victim's database infringed the victim's right as a producer of database (reproduction right).
• Evaluation: This ruling follows the same legal principles as the previous Supreme Court judgment of May 12, 2022, No. 2021Do1533. The 2022 Supreme Court ruling is understood to be a ruling that protects the investment of the producer of database while also considering the social request for information sharing required in the information society. Unlike the 2022 Supreme Court ruling, the facts of this case involved copying the victim's database and selling it for less than one-tenth of the price, thereby unfairly harming the victim's interests. This case appears to be one where the considerations of the 2022 judgment, such as information sharing and prevention of restriction of competition, were hardly found.
1. Overview of the Case
The defendant instructed his employees to develop a program that imitated a program called 'EMS7' (hereinafter referred to as the 'Victim’s Program') produced by the victim's company, and then copied the database of the victim's 'EMS7' program (hereinafter referred to as the 'Victim’s Database') without the victim's permission, and sold a six-month license to use the unauthorized copy of the database for 120,000 won through his company's website from January to February 2018.
In response, the prosecutor filed charges on the grounds that (1) the defendant violated the victim's rights as a producer of database (specifically, the right of reproduction) by copying the Victim's Database without authorization for commercial purposes, and (2) the defendant infringed upon the victim's copyright in computer program by creating the defendant's program with similar functions and interface as those of the Victim's Program.
2. Analysis and Reasoning for Each Issue
2.1. Infringement of Database Creator’s Rights
In order to constitute an infringement of a database creator's rights, (1) the victim’s database and the victim must be a 'database' and a 'producer of database' under the Copyright Act, respectively, and (2) all or a substantial part of the victim’s database must be reproduced, distributed, broadcast, or transmitted.
2.1.1. Determination of Database and Producer of Database
The victim's database is mainly composed of 'materials' and 'unit costs.’ 'Materials' refers to all material costs, labor costs, and expenses , etc. used in construction work, while 'unit costs’ refers to the remuneration and usage fees calculated by taking into account the required quantity per unit of construction of materials, labor, equipment, etc. to carry out a specific construction project, etc., time spent, and construction conditions , etc. – in a simple term, price per unit.
The data in the “Materials” of the victim's database is a monthly update of three types of price information: (1) prices published by the Public Procurement Service, (2) transaction prices from the Korea Construction Association, and (3) price information from the Korea Institute of Applied Statistics, of which (2) and (3) are data obtained through paid subscriptions. To build this database, the victim hired specialized employees in each field, including architecture, civil engineering, machinery, and electricity, etc.
The data in the “Unit Costs” is based on the “Standard Construction Specifications” published by the Korea Institute of Construction Technology, under the Ministry of Land, Infrastructure and Transport (MOLIT). However, it is not possible to create unit costs by copying the standard construction specifications, but requires a process of combining, interpreting, and applying those data by professional staff. The victim constructed the “Unit Costs” database by entering formulas and numbers derived from interpreting the standard specifications, along with other data collected to calculated construction costs.
Considering these circumstances, the lower court held, and the Supreme Court affirmed, that the victim’s database was a compilation of tens of thousands of elements arranged or organized in a systematic manner and that individual elements could be accessed and searched through the victim’s program, thus constituting a “database,” and that the victim was a “producer of database” because it had made significant investment in both human resources and materials in the creation of the victim’s database. In particular, public data, such as prices published by the Public Procurement Service and standardized specifications, which are available to the general public, were also systematically arranged through the victim's interpretation and thus constituted components of a protected 'database' in determining whether the rights of the producer of database were infringed.
2.1.2. Reproduction of a Substantial Part of the Victim's Database
The defendants admitted to copying the victim's database during the investigation. According to the evaluation of the Korea Copyright Commission, the defendant's database has “90% similarity in table names, 98.2% similarity in schema, and 90.4% similarity in data” to the victim's database, and also contains “typos, errors, duplicate entries, and data provided only to the victim's company from a certain company” in the victim's database. Given the defendant's testimony, the presence of common errors, the data similarity of over 90%, and the high similarity of table names and database schema, it appears that the defendant copied the victim's database entirely. The lower court found, and the Supreme Court affirmed, that the defendant had copied a substantial part of the victim's database, both quantitatively and qualitatively, and infringed the victim's rights as a producer of database.
2.2. Infringement of Copyright in Computer Program
This part of the indictment states that “the defendant copied the victim's program by creating the defendant's program by providing the same or similar functions as the victim's program and configuring the user interface to give users the same or similar impression as the victim's program in general,” but does not state that the defendant copied the source code of the victim's program. The lower court acquitted the defendant of this part of the indictment, finding that although it was admitted that the defendant's program was similar to the victim's program in terms of functions and screen configuration, the construction price program is a program that calculates by entering data such as standard specifications in accordance with the Public Procurement Service's integrated construction price calculation program and manual, so it cannot be said that there is creativity in the functions, menu configuration, interface, etc. of the victim's program. The prosecutor did not appeal this acquittal, so there is no Supreme Court decision on this point.
3. Flow of EU’s Database Protection Policy
The rights of a producer of database under the Copyright Act was introduced in 2003 referencing the EU's 1996 Database Protection Directive. The purpose of protecting rights of a producer of database is to encourage investment in the database industry by providing exclusive rights even to database lacking creativity. The EU Commission conducted evaluations of the Database Protection Directive twice, in 2005 and 2018, both of which concluded that there is no clear evidence that the Directive has contributed to the growth of the European database industry or an increase in database production, but that the current balance of stakeholders' interests does not favor repealing or amending the Directive. In this situation, the EU enacted the Data Act (effective January 11, 2024) to secure users' rights to access data and share data with third parties, and partially restricted the rights of database producers. Article 43 of the EU Data Act stipulates that the 1996 Database Protection Directive does not apply to data acquired or generated from a connected product or related service. This is to ensure service users' access to data generated by sensors and machines in the course of using services in IoT environments and rights to share it with third parties (mainly aftermarket operators who are SMEs). In addition, the Court of Justice of the European Union (CJEU) has issued a ruling that increased the burden for rights holders in proving database infringement (CV Online Latvia v. Melons, Case C-762/19, June 3, 2021). In this case, the CJEU held that database infringement through extraction and re-utilization is established only when such infringing activity deprives the database producer of economic benefits that would allow it to recover its investment. According to this ruling, the plaintiff (database producer) must further prove that the defendant's infringement deprives the plaintiff of the economic interest of recovering its investment. This ruling strongly suggests that the rights of the database producer must be properly balanced with the rights of users and third parties (competitors) to access and use the data. It seems to be a trend in EU database policy that, regarding the rights of database producers, such competition law perspectives should be taken into account in order to avoid possible data monopolies.
4. Significance of the Ruling
The follows the same legal principles as the Supreme Court's judgment of May 12, 2022, No. 2021Do1533. However, the 2022 ruling stated that (1) the information collected by the defendant from the API server of the victim company was part of the database related to the victim company's accommodation facilities. (2) The information was already well known, and it seems unlikely that it would have taken significant cost or effort to collect it, or it was already publicly available and could have been obtained through the app in this case, and there is no data on, inter alia, updating the database. (3) The court concluded differently from the ruling of this case by denying infringement of the database producer's right (reproduction right) on the grounds that the defendant's reproduction of the database was not considered to be in conflict with the victim company's normal use of the database or to unduly harm the victim's interests. The above 2022 ruling is understood to be a ruling that protects the investment of the database producer while also considering the social request for information sharing required in the information society. It can also be considered to be in line with the recent EU database policy in that it mentions information sharing and prevention of restriction of competition.
In order to find the significance of this ruling, it is necessary to comparatively examine the reasons for the acquittal in the 2022 ruling. This case also involved the use of public data, so there are similarities with the case of the 2022 ruling, which involved the collection of publicly available accommodation information, and from a competition law perspective, the defendant, a later market entrant, collected data of the victim, a first mover in the competitive market, on a large scale. However, in this case, the defendant copied and sold almost all of the “materials” and “unit costs” parts of the victim's database, which are the core of the victim's database; although there appears to be a significant amount of public data in the victim's database, there was a significant investment in both human and material resources in building the database, including the work of professional staff to compile, interpret, and apply the data after its collection, and the purchase and updating of some data for a fee; and the defendant in the case of the 2022 ruling appears to have collected the victims' data to develop his own sales strategy and did not resell, or provide to services, such data as is, whereas the defendant in this case copied the victims' database and sold them for less than one-tenth of the price. Therefore, it should be viewed as particularly prejudicial to the victims' interests, which differentiates this case from the case of the 2022 ruling. This case appears to be one where the considerations of the 2022 judgment, such as information sharing and prevention of restriction of competition, were hardly found.
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If you would like to learn more about this newsletter or have any other questions, please contact Eung Jun JEON of LIN's IP Team at ejjeon@law-lin.com.
If you would like to learn more about this newsletter or have any other questions, please contact Eung Jun JEON of LIN's IP Team at ejjeon@law-lin.com.