Korean Laws Blog

Globalization of Korean Antitrust Law: Upcoming Paper at ANU in Canberra

2007-01-05T16:04:00.000-08:00

I am humbled that I have been invited to give my paper "Globalization of Korean Antitrust Law" at the Korean Studies Graduate Student Conference in Canberra in January.

Ranked No. 3 on Google

2007-01-05T15:49:00.000-08:00

Despite its very recent history, the Korean Laws Blog is now ranked 3rd on Google. The No. 1 Korean Laws Blog is Korea IP Law Blog.

I will continue to make every effort to provide the best information I can on Korean Laws, particularly in high-tech and antitrust fields.

I congratulate Korea IP Law Blog on their No. 1 ranking, as it is extremely informative in content and has details from IP legal practice in Korea which would be otherwise hard to come by.

Historical Evolution of the Per Se Category

2007-01-02T23:27:00.000-08:00

New Rule of Reason

2007-01-01T21:44:00.001-08:00

Newberg on Rule of Reason in High-Tech Markets

2006-12-30T15:06:00.000-08:00

"... antitrust law can facilitate or impede the production of innovation. The misapplication of the per se rule to pooling agreements resolving blocking relationships is the paradigmatic example of the latter, while the rule of reason analysisin the BMI case exemplifies the former. ... The tendency to wish away uncertainty by imposing orderly classifications upon conduct and business relationships is understandable, but ultimately antithetical to the task of analysis. For it is only by confronting the full implications of uncertainty that we can hope to develop methodologies for its management."

Joshua A. Newberg, ANTITRUST, PATENT POOLS, AND THEMANAGEMENT OF UNCERTAINTY, 3 ATLANTIC L. J. 1 (2000), p. 30.

I haven't had time to go over this point of view yet, but it would be important as a possible sophistication of the rule of reason in high-tech markets.

California Dental Association Case

2006-12-29T21:52:00.000-08:00

What was the reason for the creation of the 2000 US Horizontal Collaboration Guidelines?

The FTC found that the California Dental Association had violated Article 1 of the Sherman Act. In concrete terms, it issued an order that prohibited the California Dental Association (CDA) from imposing a host of restrictions on the advertising and solicitation practices of its members. At the time it was thought by the FTC that it could apply a "quick look" analysis in finding that the conduct was illegal, without having to engaging in a full rule of reason analysis of its positive and negative impacts on competition. The Supreme Court, however, by a 5-4 majority, rejected the theory of the FTC. The Supreme Court held that the rule of reason applied in this case.

The FTC created the 2000 US Horizontal Collaboration Guidelines in order to clarify its policy in the wake of the California Dental Association case.

US Decision on Anti-Competitiveness of Patent Settlements

2006-12-28T18:26:00.000-08:00

This is an interesting case on the issue of the anti-competitiveness of patent settlements. Click on the link below to the Antitrust Law Blog:

http://www.antitrustlawblog.com/article-reverse-payment-patent-settlements-the-second-circuit-speaks-out.html

2000 US Horizontal Collaboration Guidelines

2006-12-28T05:15:00.000-08:00

The "new" rule of reason under the US Horizontal Collaboration Guidelines is applicable to agreements between competitors in high-tech industries, although there is some discussion about the role of dynamic efficiencies. Carl Shapiro has argued that intellectual property law and antitrust law are not in conflict but are complementary in achieving dynamic efficiencies. It is worth examining the history of the rule of reason in the United States, because antitrust law has been thought of as achieving static efficiencies by the Chicago School. In particular, until the 1979 BMI decision of the US Supreme Court, the rule of reason had remained distinct from conduct such as prixe-fixing ancillary to joint ventures which had been held illegal per se. The BMI decision was the start of the development of a "truncated" rule of reason, which evolved through the 1986 NCAA decision and more recently the California Dental Association case. Eventually, the combination of these decisions led to the adoption of the 2000 US Horizontal Collaboration Guidelines. As high-tech industries increasingly become issues for antitrust, it is important for the "new" rule of reason to be adaptable to dynamic efficiencies; despite the problem of a criteria in relation to dynamic efficiencies, there have been some solutions proposed, in particular the consumer welfare test in relation to patent settlements proposed by Carl Shapiro. These principles could be introduced into Korea through the revision of the KFTC Horizontal Collaboration Guidelines which are somewhat out of date and have falled into disuse.

More on Virtual Currencies

2006-12-27T16:34:00.000-08:00

Here is another article on the law to make virtual currencies illegal in Korea.

Click the link below:

http://virtual-economy.org/blog/finally_korean_governement_are

The language of the prohibition appears broad as it appears in the original Korean newspaper article: 게임머니 거래를 `중개'하는 행위가 불법으로 규정된다 (the act of "mediating" trading in game money is provided as illegal).

Is Harvard University "mediating" in online game money if it accepts Linden dollars from Korean students at its Second Life campus? Also, where does the "mediating" have to take place? There are other jurisdictional questions - one could recall the already existing problems of people (possibly including Korean citizens) opening a virtual casino HQed in the Cayman Islands, which might for instance be called "Pada Iyagi". Is the proposed law worth the "chilling effect" on the Korean online gaming industry for the nine months until amendments are expected to be passed?

It appears to be a "shoot first, ask questions" later approach. First, the broad language of the prohibition could result in the online gaming community being made potential criminals; only later, as potential criminals, would you be able to give your community views. Very Machiavellian.

To be fair though the Pada Iyagi online gambling scandal seems to have been a major motivation behind the move - yet questions of proportionality have to be asked as the language of the prohibited conduct appears to be not limited to gambling on MMORPG sites.

The Ministry of Culture and Tourism states that it is investigating basic regulatory proposals in relation to "Item Currency Trading" to be excepted from this proposed law. It plans to hold a public inquiry to gather community views, and then aim to pass yet another amendment to the Game Industry Promotion Act by September 2007 and will submit its proposal for this amendment in early 2007.

This will amount to people explaining to the Ministry why their particular business activities should not be illegal. Be prepared for some interesting criteria to emerge which may leave everyone in the dark except for those who are best at lobbying the Ministry.

There are claims made on the blog that Linden dollars, etc., would be not subject to regulation but I am not convinced that it would not be illegal (now or with subsequent amendments) to withdraw Linden dollars in Korea because the legal criteria are not clear.

E.g., Would there be an exemption for spreading Korean culture?

Great! Government Intervention Part 2

2006-12-27T03:03:00.000-08:00

The Ministry of Information and Communication in Korea has established the standard for government intervention in high-tech industries such as broadband and telecommunications.

On the other hand, for some reason it is apparently SME-driven in a way that runs counter to market principles. The reasons for this intervention on the behalf of SMEs would be the existence of "market failure", although it remains to be seen whether dangers of "government failure" would be realized.

In a previous posting, the establishment of a new body [English translation of name forthcoming] which has as one of its functions the support of IP transfers to SMEs. That previous posting noted that it was unclear as yet whether competitive principles would apply in such an arrangement.

Part of the context for the establishment of this body, is the large financial assistance provided by the Ministry of Information and Communications to SMEs. Around six months ago, a press release was issued by the Ministry announcing $15 billion Won (approx. $US 15 million) of financial assistance to Korean SMEs in high-tech industries.

Examining the details of this policy makes it abundantly clear that the Ministry is engaged in "picking winners", more formally known as supporting infant industries. The 59 projects supported include a project to develop 'chipsets for mobile WiMax terminal,' 'small WiBro base station'. These were selected from a total of 138 projects proposed by small and medium sized IT venture companies.

This support for high-tech SMEs is based on the '2006 IT Industry Competitiveness Enhancement Project Plan' announced in January 2006 and falls under the IT839 strategy and other high-technology related projects. Projects to 'enhance the competitiveness of the IT industry' were started in 1999 by the Ministry to support projects to develop industrial technology, where technological value and industrial innovation capabilities are large.

As for the criteria for selection: "The selected projects were also in the field where demand from businesses is high. For instance, in the digital contents, software solution, BcN, information security, DTV/Broadcasting and next-generation mobile telecommunication sector."

Ministry grantees enter into a Project Implementation Agreement with the IITA (Institute of Information Technology Assessment).

Click on the link below and you will find the press release dated Jun 1, 2006:

http://eng.mic.go.kr/eng/index.jsp

Antitrust Limits to Patent Settlements

2006-12-26T17:14:00.000-08:00

The Ministry of Information and Communications should consider the work of Carl Shapiro on patent settlements in moving ahead with horizontal cooperation in the five target industries where patent disputes are (apparently) blocking innovation.

In his article published in the RAND Journal of Economics in Summer 2003, Shapiro argues that patents settlements can stifle competition and harm consumers. Shapiro proposes a specific antitrust rule limiting such settlements - a settlement must leave consumers at least as well off as they would have been from ongoing patent litigation.

In other words, the Ministry of Information and Communications should give the foremost consideration to consumer welfare if it decides to intervene in patent settlements in the five target industries. In this regard, I suggest that it has the obligation to consult with the KFTC lest the Ministry becomes involved in anti-competitive patent settlements that harm Korean consumers.

Judge Posner on Second Life!

2006-12-26T01:24:00.000-08:00

While I am somewhat critical of the legal theories of Judge Posner and the Chicago School, I think that Posner is an endearing character. This was confirmed to me by his recent "celebrity" appearance on Second Life. Click on the link below:

http://money.cnn.com/blogs/legalpad/index.html

Second Life, which is run by Linden Labs servers, involves the concept of a "metaverse" - a virtual-reality based internet. "Metaverse" was a phrase coined by Neal Stephenson in his novel Snow Crash (1992).

Will any Korean law enforcement officers make virtual appearances on Second World in the near future?

Incidentally, for the first millionaire in Second World, click on the link below:

http://www.kotaku.com/gaming/second-life/second-lifer-a-first-life-millionaire-217500.php

Proposed Korean Law to Make Illegal Virtual Currency Trading

2006-12-26T00:52:00.000-08:00

Apparently the Korean National Assembly is going to pass a law by the end of the year to stop the trading of virtual currencies in online games. Click on the link below:

http://mmorpg.qj.net/Proposed-Korean-law-to-burst-virtual-economy-bubble/pg/49/aid/74123

While the context of the law seems to be the success of Wang, the Chinese student who made over a million dollars selling virtual MMORPG items (MMORPG: Massively Multiplayer Online Role Playing Game), there are concerns that this law could impact on other activities which do not necessarily amount to "online gaming" yet take place in the same virtual space. One example, would be the educational services in Second World, where Harvard University has a campus; this law might stop Korean students being able to study internationally on equal terms with foreign students. Second World trades in a currency known as Linden dollars.

The law could be seen as a move to block transactions that could grow to a scale that would lead to interference with national fiscal and monetary policies.

Click here for a Korean opinion against the proposal:

http://www.gamejournal.co.kr/renew/news/newsView.jsp?gubn=newsboard&inx=4904&codes=hot

I am still looking for a pro amendment opinion but will post one when I find it.

Great! Government Intervention!

2006-12-25T10:27:00.000-08:00

{this is a draft version of this blog}
Collaboration in terms of patent pools and cross-licensing is generally pro-competitive.

The direct involvement of the Ministry of Information and Communications in high-tech patent disputes (covering five areas of patents - GSM mobiles, DMB, RFID/USN, intellegent robots, WiBro), however, is not exactly encouraging for competition given the past role of government agencies in (knowingly or unknowingly) implementing policies that have facilitated cartels.

http://epic.kdi.re.kr/epic_attach/2006/R0612101.pdf

While the proposal requires further consideration, there may be antitrust concerns with patent settlements and government intervention is unlikely to be appropriate, at first glance anyway.

Why is the KFTC not on the committee?

Also, the transfer (or sale) - the language used is non-specific - of patents to SMEs gives one the distinct impression of stronger government involvement than would meet the eye.

Who knows, "free" licenses of government patents may just start falling from the sky in Korea...

My Thesis Proposal

2006-12-25T06:26:00.000-08:00

Regulation of Cartels in High-Tech Markets

The hypothesis in this paper is that antitrust law principles should be modified to prevent cartel behavior in high-tech markets by allowing intellectual property laws to promote dynamic efficiency. Antitrust law in so-called “smokestack industries” focused on static efficiencies. Competition was a matter of reducing costs of production (productive efficiency) while ensuring such efficiencies were passed onto consumers (allocative efficiency). Antitrust law as it presently stands on the statute books is the culmination of over a hundred years of regulation of competition to achieve static efficiencies. Yet the project for the next hundred years will be how to apply the same principles of competition to promote the development of intellectual property as an essential part of products and services in the 21st century (dynamic efficiency).

One thesis that has been presented by Chicago school scholars such as Posner is that antitrust required relatively little modification to function in the new economy. In other words, antitrust should be restricted to the field of productive and allocative efficiencies. Dynamic efficiencies are beyond the scope of antitrust law, according to this view. Antitrust has reached its culmination in the Chicago school, such scholars argue, so that it needs to focus its efforts on enforcement. This view has been most eloquently put in the book authored by Posner, Antitrust Law (2001).

Another thesis implicitly supported by Post-Chicago school scholars led by Carl Shapiro is that intellectual property is the major field of competition for the 21st century so that antitrust law and intellectual property will converge to an increasing degree. In this new world of antitrust, intellectual property can be seen as even more important than reducing costs of production (productive efficiency) and the passing of such efficiency onto consumers (allocative efficiency). To illustrate this point, one might imagine the thousands of patents involved in the production of high-tech products that have become superior substitutes for inferior products involving lower levels of intellectual property, e.g., your I-Pod is far superior in capabilities of storage and sound quality to a Walkman, which is in turn far superior in terms of an immobile cassette player in terms of mobility, etc.

This paper argues that the law in the area of horizontal cooperation in high-tech industries is not settled and that new legal theories are developing that will require more detailed guidance from antitrust regulators in order to ensure that anti-competitive practices are stopped and pro-competitive practices are promoted. The work in the thesis will build upon the substantial work of Carl Shapiro in this field in developing a new legal theory for the regulation of cartels in the 21st century.

Guidelines of reviewing undue exercise of intellectual property rights

2006-12-23T01:10:00.000-08:00

I found a slightly more detailed statement of the law in relation to high-tech cooperation in the Korean IP Guidelines. The statement is very brief and provides no real guidance as to the legal theory under which horizontal cooperation would be illegal. Note that neither Art. 19 nor the Guidelines on Art. 19 produced by the KFTC elaborate on the high-tech issue. I think it would be appropriate for the KFTC to review Art. 7 of the IP Guidelines in light of the US law (as well as law in other jurisdictions) with particular reference to the work of Carl Shapiro (more detail about the Antitrust/IP guru in a later blog).

Guidelines of reviewing undue exercise of intellectual property rights (KFTC Aug. 2000)

Article 7 Cross-Licensing and Pooling-Arrangement of Intellectual Property Rights

When anti-competitiveness occurs from signing cross-licensing contracts or pooling-arrangement of intellectual property rights between licensors who are in mutually competitive or substitutive relations, provisions under Article 19 (Restrictions on Improper Concerted Acts) shall be applied.

Yep that is it! All one sentence of it! Also there is a problem of scope in that patent settlements and standards setting are not mentioned here. Will definitely have to analyse these points in my Ph.D!

Collusion in High-Tech Industries

2006-12-22T10:53:00.000-08:00

This is a test blog. Recent cases of collusion in semiconductors and LCD monitors involving Korean executives has made the extraterriorial application of antitrust law a hot topic in Korea. The real issue, however, may be uncertainty in the enforcement of horizontal cooperation rules in a global setting.

There is an international consensus that so-called "hard-core" cartels are illegal, yet in Korea all forms of illegal cartel are treated essentially the same, i.e. through corrective measures and administrative fines for firms. Prosecutions are hard to find since the Korea Fair Trade Commission has been reluctant to file such complaints except in the case of serious - e.g. collusion maintained by means of threats or force - or repeated violations. (Min Ho Lee, "Recent Developments in the Treatment of Collusion by Korean Courts", Journal of Korean Law, Vol. 4 No. 2, p. 161)

It is also unlikely that presumptions of agreement under Art. 19(5) of the Monopoly Regulation and Fair Trade Act could be prosecuted criminally.

Not only are cartels not punished criminally as a rule for the above reasons, but guidance on illegality for other cooperative behaviour is insufficient. While the rule of reason applies generally to these acts, there is no indication as to how this would operate in the context of high-tech markets. Thus, there is a lack of legal certainty with regards to standard setting, cross-licenses, patent pools, patent settlements, etc. On this point, I am interested in the work of Professor Carl Shapiro and the US exeperience in general.