Copyright L&E for nonprofit performance of music, found constitutional

The Constitutional Court of Korea upheld Art. 29(2) of the Copyright Act as constitutional (2016HunMa1115 & 2019HunGa18, November 28, 2019). The Art. 29(2) permits a public performance of commercial phonograms and audiovisual works if no profit is received in return from audience, excepting cases as prescribed by the Presidential Decree.

This provision has long been under attack by music industries and European Commission. When the EU-Korea FTA was negotiated from 2007, the EU tried to remove or substantially weaken the copyright L&E permitting a non-for-profit performance of phonograms. But the provision survived because of a deal between Korean and European negotiators.[1] Nonetheless, the EU has repeatedly complained that the L&E provisions of the Korean Copyright Act, especially Art. 29(2) violates the EU-Korea FTA.[2] The EU strategically utilize the venue called the EU-Korea IP Dialogue, which was created by the EU-Korea FTA. The EU also threatened initiation of the dispute settlement proceeding under the FTA and WTO TRIPS Agreement.[3] Due to the EC’s persistent trade pressure along with demand of domestic and international copyright industries including IFPI, Korean government eventually amended on 16 August 2017 and enforced from 23 August 2018 the Presidential Decree.[4] Therefore, huge number of establishments such as pub, café, restaurant, fitness center and small outlet mall (having an area of less than 3,000 square meters) have to pay copyright fees. Only small and tiny business having an area of less than 50 square meters remain exempted.

Apart from this, in 2016, the Korea Music Copyright Association (KOMCA) and the Recording Industry Association of Korea (RIAK) went to the Constitutional Court arguing that Art. 29(2) of the Copyright Act unconstitutionally infringed the fundamental rights of music copyright holders, especially the right to property under Art. 23 of the Constitution (Case No.: 2016HunMa1115).

The Constitutional Court held that purposes of Art. 29(2) of the Copyright Act are to help the general public enjoy cultural benefits, which is legitimate from the constitutional perspective. And, according to the Court, the means to achieve such purposes, enabling anyone to play commercial phonograms and perform them to the public under certain circumstances, is also appropriate as it improves the accessibility of the public to the commercial phonograms. Further, the Court found that Art. 29(2) provides that the Presidential Decree shall set forth the cases where the nonprofit performance exceptions are not applied. In such cases, the copyright holders can still exercise their copyrights to commercial recordings, and there is a possibility that copyright holder can obtain indirect profit from sales increase of commercial recordings which are made more widely known from the public performance.

The Court viewed the structure of Art. 29(2) is problematic because it takes the form of principle restrictions and exceptional guarantees on property rights. Nonetheless, such form is, held by the Court, within the legitimate legislative choice to strike a balance between the protection of property right of copyright holder and the public interests for the enjoyment of cultural benefits in specific cases, and therefore Art. 29(2) of the Copyright Act is not in violation of the principle of minimum infringement. Further, the Court viewed the subject provision meets the balance of interest test because the public interest for the enjoyment of cultural benefits seems to outweigh the private disadvantage of copyright holder of failing to control public performance of commercial recordings or to be paid from such performance.

Concerned about this decision is the dissenting opinion of three judges. They viewed that the three-step test of the Berne Convention can be used as an important guideline for determining constitutionality of the subject provision, and that the subject provision is not an appropriate means to fulfill the purposes of legislation given that: ① it is difficult to find similar foreign legislations; ② Japan repealed similar provisions in 1999 after controversy on inconsistency with international standards; and ③ there is no evidence showing enhanced cultural benefits from the provision, making the subject provision to merely function as transferring profits created by playing and performing commercial recordings from copyright holder to those who have no right on the recordings. In addition, they concluded that while the private disadvantage such as loss of recording sales profit and loss of the secondary profit from controlling commercial purpose performance of the recordings is highly significant, the public interests of cultural benefits which are expected to be achieved from the subject provision does not exist or is negligible.

  1. According to the deal, the EU withdrew its demands on remuneration rights of phonogram producers and performers for public performance and ten-years period of data exclusivity, and Korea, in exchange, agreed to expand the border measures to cover patent and geographical indications in addition to copyright and trademark.
  2. At page 7 of the EC Report of 2015: “The EU recalled the FTA implementation issue concerning the provisions on public performance rights, and the need for aligning Korean legislation with the FTA.”; and pages 9-10 of the EC Report of 2016: “The EU side further expressed its concerns about the lack of implementation of the FTA provisions on public performance rights, pending the revision by Korea of the Copyright Act and underlined the economic importance for both the EU and Korea of this issue.” which was reiterated in the 2017 Report and in the 2018 Report
  3. At page 2 of the Appendix of the Korean government’s press release dated 20 August 2018
  4. The trade pressure of the EU is in a conflict with what both agreed during the negotiation of the FTA, which will be discussed in another blog post later.