Research Report
A Study on the Legislation to Revitalize Data Transactions and Distribution
Ⅰ. Background and Purpose
○ Korea has recently advanced several legislations to promote data usage to the point where similar examples are hard to find elsewhere in the world.
- In an environment where data-related legislation is still divided and fragmented, there are scattered tasks that need to be improved for more systematic data utilization.
○ Not only should the fundamental legal status of data industry legislation be clearly established in the legal system by attempting to achieve unity and consistency among specific data-related laws, but a close analysis of the following legal concerns and institutional changes should also be undertaken.
○ This study intends to analyze the current state of legislation relating to data transaction and distribution, identify impediments in transaction practice, and implement methods to promote data transaction and distribution through various means, such as public and judicial data protection approaches.
Ⅱ. Main Contents of This Study
▶ The concept of data transaction and dissemination, as well as the constraints impeding its implementation
○ The Data Industry Act defines data as "acquired through observation, experimentation, investigation, collection, and so on to create various added values, or generated through information systems and software pursuant to Article 2, Subparagraph 1 of the Software Promotion Act, defined as "data or information that can be processed optically or electronically."
○ There is no clear and unified definition of the data 'transaction' and 'distribution' concepts that will be investigated in this study.
- In a wide sense, the idea of data transactions also encompasses non-financial transactional connections, such as disclosure, sharing, and exchange. In its narrowest sense, it is a transactional partnership that offers monetary incentives for the sharing or use of data.
- In contrast, the term 'data distribution' refers to a range of operations associated with the transfer of data, such as the transmission and provision of data created, gathered, extracted, analyzed, and processed by one entity to another.
- In other words, "data distribution" encompasses all actions that result in the transfer of data between transacting parties, whereas "data
transaction" refers to the transfer of data based on legal connections between designated transaction parties (data holder, data processor, data provider, data user, etc.).
○ The specificity of data is connected to the specificity of the data trading market, implying that it is difficult to evaluate both the general product market with its physical characteristics and a trading object such as securities from the same vantage point.
- Despite the presence of brokers that mediate data transactions and multiple trading platforms that register and authenticate data products, the vast majority of actual transactions are conducted over-the-counter, with the parties directly negotiating the contents of the desired product. The occurrence of transactions complicates data transaction research and regulatory compliance.
○ According to the survey results of the 2021 data industry status survey, 52.1% of the reasons for not engaging in data trading were "lack of good quality data," 37.0% were "unreasonable pricing of purchase data," and 36.3% were "lack of data distribution channels." Other factors included difficulty in locating and searching for data, which was at 31.5%, "Legal problems/legal support for distribution/utilization of data, including personal information," 7.5%; "data quality problems," 6.8%, and others.
- Therefore, it is essential to consider the preparation of a pricing policy based on transparent and reasonable standards at the legal and institutional level, the securing of distribution channels for data transaction expansion, the development of an integrated portal service to support data materials and search, and the facilitation of connections between data consumers and suppliers (supply-demand mismatch resolution policy), improving legal issues related to data transaction and distribution, as well as measures to improve data quality.
▶ The current state and ramifications of data trading platforms both domestically and internationally.
○ China is actively running public (government) data exchanges and platforms by advancing the availability of government-led public data resources. Furthermore, in terms of the legal framework, a data governance structure was developed in 2021 with the introduction of the Data Safety Act and the Personal Information Protection Act.
- Aggressively promote data security technologies such as personal information protection calculations, continue efforts to stimulate development of related technologies and boost corporate knowledge on data security improvement, and maintain legislative research and data ownership-related actions.
- Various methods are being explored to standardize responsibility and authority associated with data transactions, as demonstrated in the case of Wenzhou City in Guangdong Province.
○ In the case of the United States and Japan, the implications for Korea derived from reviewing the issues and terms of use in the transaction contract are as follows
- First, there is a difficulty in ensuring the dependability of the platform's data quality.
- Since there is no set review mechanism for the quality of registered data and sample data registration is optional, it is burdensome to conduct transactions without knowing if the data fits the user's demands or if there are any faults or mistakes in quality.
- Second, in order to overcome the above-mentioned issue of data quality's dependability, some may advocate for platform operator oversight of transactional practices and use of contracts.
- Additionally, it is essential to determine whether the scope of ownership and use of data and results derived from data use, the distribution of profits accordingly, the problem of claiming data returns when leaving the platform, the disclaimer of brokers and data providers, and limited liability have been adequately explained and disclosed.
▶ Domestic legislative developments and implications
○ The Data Industry Act is the fundamental legislation governing data in the private sector, and its purpose is specified. Upon examination of the actual legislation, it seems inadequate to assert that the fundamental principles for data generation and usage have been created.
- In building convergence industrial policies in various domains, it is necessary to define fundamental principles that prioritize the gathering, securing, opening, and distribution of data, as well as ideological and ethical norms governing the use and use of data. Or, instead of prescribing merely a basic fact-finding survey (Article 27), as in general industrial legislation, the inclusion of mid- to long-term demand projection surveys or market-level evaluations, as well as the creation of supporting grounds for challenging tasks and creative data-driven research, must be supplemented by individual rules on policies and systems from a mid- to long-term viewpoint that is close to the character of the framework act.
○ The Industrial Digital Transformation Promotion Act is expected to drive the revitalization of industrial data transactions by establishing a system for comprehensively establishing and promoting industrial digital transformation policies, as well as various policy and institutional devices to support digital transformation activities in the private sector.
- Article 9 of this Act's rules on industrial data generators' use and profit rights play a role in persuading contractual parties to more clearly specify the connection of rights, such as the category of use and authority of generated data, when signing an industrial data transaction contract. However, since there is some ambiguity in interpretation, it is important to seek legislative change in the future.
▶ Deriving response directives by analyzing outstanding concerns
○ In this chapter, two expert surveys using distinct approaches were undertaken in order to examine outstanding concerns and create countermeasures.
○ First, using a FGI (Focus Group Interview) survey aimed at industry professionals involved in the data trading sector, the present condition of trading on the market and main problems were investigated.
- As a result of the survey, it has been established that there is a need to organize future sub-statutes more clearly, to have a clearer policy objective when establishing administrative rules, and to approach policy creation with a long-term perspective.
- In addition, we were able to confirm that the true purpose of the system can only be attained if technical measures and realistic considerations are considered together on topics that have been important as legal issues, such as information subject incentive guarantee measures, data creator authority, and the scope of responsibility of platform companies.
○ Second, based on the real institutional and legislative requirements revealed by the FGI survey, a survey of legal professionals was performed to assess the existing legal system and identify future tasks for its improvement.
- In general, experts praised the government's writing of standard contracts for data transactions. Nevertheless, views varied as to what kinds of contracts were specifically needed and the legal complications involved with particular types of data transactions. Moreover, numerous views are also presented on the legal issues related to representative types of data transactions.
- Regardless of whether there is a deviation from the standard contract, it was agreed that the data provider would assume some responsibility for the data's quality or the specifications supplied at the time of the transaction. In addition, for the data brokerage firm (platform), transaction security and activation are essential. In addition, we agree that a disclaimer should impose a certain amount of obligation to prevent unfair activities.
- In regard to current legislative developments, it has been said that excessive protection rules impede the vitalization of the sector, and that many restrictions that overlap might raise the transaction's complexity and cause misunderstanding among company operators.
▶ A review of data legal protection and attribution concerns
○ This chapter discusses the issue of what rights can be devolved on to data holders (legal principle of data authorship), the issue of the protection system that a holder of right can claim under current law (legal principle of protection of data right holder), as well as issues in data transaction contracts. By gathering the current debates and viewpoints around the contract law issue (data transaction law) and assessing the argument's central premise, we concentrated on the theoretical foundation for progressing to data transaction.
○ The topic of whether data ownership is essential or if analogous rights already exist is influenced by both legal and economic considerations.
- Particularly, the issue of whether data ownership is important should include the economic effect on the market if data ownership is given to a superior contractual party.
- Furthermore, once a data contract is entered into, it should be stated whether the putative data owner can guarantee access to the data and transfer ownership.
○ It would be beneficial to process the data via a licensing agreement that permits access to the real data while preserving de facto exclusivity.
- Data may be used with other information to generate cash, but data alone has no inherent revenue-generating capabilities.
Ⅲ. Task involving the enhancement of data transactions and promoting distribution
○ First, as a way of revitalizing the data trading platform, the problem of contract interpretation between trading parties in the open market, the issue of the sales contract through the data brokerage platform, and dispute resolution between the parties inside the platform were suggested.
- It is required to systematically describe the contents of liability for contract breaches, including non-provision of data and faults that may arise between data sellers and data purchasers, and the content must be continuously improved by amendment of associated terms and conditions.
- Next, while considering improvement measures in terms of data platform brokerage activities, it appears that the development of platform transaction order via the enhancement of data exchange terms and conditions will be significant.
- Given that the transaction system within the data trading platform is a vast marketplace utilized by numerous sellers and buyers, it appears necessary to include a clause in the terms and conditions for the data platform's own dispute resolution system and to actively operate its own dispute resolution organization.
○ Second, it is proposed that the uncertainty in the interpretation of new laws seeking legal protection for data, such as the Data Industry Act, Industrial Digital Transformation Promotion Act, and Unfair Competition Prevention Act, must be resolved.
- Regarding the use and profit rights of data producers outlined in Article 9 of the Industrial Digital Promotion Act, who is the originator of the data? Is the claim for distribution of use and profits similar to the claim for profit distribution, and if so, how are the claimable shares determined, Whether or not bona fide third parties may be protected is susceptible to different interpretations depending on how the legal nature of the right to use and profit right is established.
- Article 42 of the Data Industry Act transfers the burden of evidence for damages, which might be construed differently depending on whether the data asset protection legislation is obligatory, creating confusion.
- The Unfair Competition Prevention Act makes misuse of data illegal. In this context, the concepts of "a single person or specific people" and "administration of considerable accumulation" are ambiguous. In contrast to Japan's analogous legislation, the Protective Regulations on Limited Provided Data, which exclude situations of gross carelessness or negligence from banned activities, our law is unconcerned about this, therefore, there is opportunity for broad application of the corresponding regulation's protection scope.
○ Thirdly, it was recommended to develop a governance framework for data transactions by creating a transaction support center to address the many issues associated with data transactions.
- Due to the fact that the transaction support center may execute duties such as governance, public functions, and policy support, it is deemed capable of fulfilling its duty as an integrated window to support data policies, depending on the given role and function.