The Peninsula

The KORUS FTA and the Creative Industries

By Kevin M. Rosenbaum

Enhanced bilateral trade and investment under the Korea-U.S. Free Trade Agreement (KORUS) has positively impacted the U.S. copyright industries—producers of literary works, music, movies and TV programming, and video games and software—in several ways. As an initial matter, it is important to understand the contribution of these vital industries to the U.S. economy.  The core copyright industries combined, according to a December 2016 study, generate over $1.2 trillion of economic output, accounting for nearly 7% of the entire U.S. economy; and employ over 5.5 million workers – in high paying jobs – accounting for almost 4% of the entire U.S. workforce.  Their foreign sales and exports grew from $147 billion in 2012 to $177 billion in 2015, reflecting extraordinary growth in the timeframe since KORUS entered into force and significantly exceeding foreign sales of other major U.S. industries.

KORUS was a significant step forward in many respects for the critical industry sectors that depend on copyright protection. On the issues of copyright law reform and copyright enforcement, KORUS is one of the strongest and most ambitious trade agreements ever negotiated. It also includes important commitments that further opened the Korean market to the U.S. copyright industries. Current and future trade negotiations, including the ongoing NAFTA negotiations, would do well to build on key aspects of the KORUS agreement’s strong rules for copyright protection and enforcement, with few exceptions.

The impact of KORUS on the copyright industries has been remarkable in several ways. Back in 1985, U.S. works and products received virtually no copyright protection in Korea.  Piracy was rampant.  The International Intellectual Property Alliance (IIPA)[1] described the situation to the U.S. government as follows: “Pirates have all but taken over the sale of records and tapes, videocassettes, books, and computer software.” As late as 2007, before KORUS was signed, a study conducted by the Korean Film Council (COFIC) estimated that the Korean film industry suffered losses of $1 billion as a result of online piracy and, between 2002 and 2007, piracy reduced the overall home entertainment market in Korea by half.

Today, Korea boasts a strong copyright law, which in several respects exceeds U.S. law in its robust protections for creative works.  While this dramatic improvement in Korea’s legal standards, and subsequent upgrades to Korean enforcement efforts against piracy, have been a continual process, KORUS was undoubtedly a critical catalyst.  Almost contemporaneously with KORUS taking effect, Korea responded by adopting major upgrades of its copyright laws and enforcement regime.

The dramatic change in Korea is reflected not simply in laws and regulations, but in market realities. Thirty years ago, revenue for the U.S. copyright industries in Korea approached zero.  In 1993, IIPA estimated trade losses to U.S. industry due to copyright piracy in Korea at $423 million.  Today, South Korea is a robust and growing market for music sound recordings, movies, TV programming, videogames and other entertainment software, and books and other publications, benefiting both American and Korean creators, innovators, and workers.  The KORUS agreement has played a significant role in Korea’s transformation into a vibrant marketplace for U.S. creative works, and a cultural powerhouse in the Asia-Pacific region.  For the film industry, it is widely recognized that KORUS’s market opening steps have contributed to the steady growth of the Korean film industry with new box office records year on-year and Korean films taking 54 percent of the Korean market in 2016.  Korea is the sixth largest market in the world for video games with an estimated 25 million Korean gamers and revenues of $4.2 billion in 2017.

The Korean music market illustrates KORUS’s profound impact.  In 2012, the music market was shrinking, generating revenues of less than $200 million, a decrease of 4 percent from the year before.  But since 2012, the year KORUS entered into force, the music market has experienced double digit increases, and in 2016 Korea’s music market stood as the eighth largest in the world, with revenues of more than $330 million, an increase of over 23 percent from 2015.

Of course, notwithstanding the significant improvements to Korea’s laws and the growth of the market, important challenges remain.  For example, there has been an attempt in Korea to extend the scope of mandatory collective management of rights and statutory license fees for certain types of digital music services.  This would hurt rights holders and undermine KORUS obligations that have resulted in improved copyright protections.  In addition, the creative industries continue to raise concerns regarding efforts around the world to diminish strong copyright protection and enforcement by, for example, introducing what amount to loopholes to protection and safe harbor provisions that do not adequately incentivize Internet platforms to cooperate with rights holders on finding ways to address infringing content on their networks, thereby allowing Internet platforms to profit unfairly at the expense of rights holders.  U.S. trade negotiators should ensure that KORUS is used as a model to promote strong copyright protection and is not used to undermine such protection.

It is important that the positive changes that KORUS has helped to foster are not reversed, but instead continued and built upon.  The creative industries in both the United States and Korea – and the many high paying jobs these industries support and the economic and cultural benefits that these industries provide – depend on it.

Kevin M. Rosenbaum is Of Counsel at Mitchell Silberberg & Knupp LLP, and Counsel to the International Intellectual Property Alliance. The views expressed here are the author’s alone.

Photo from Bigotes de Gato | Fotografía’s photostream on flickr Creative Commons.

[1] IIPA is a private sector coalition, formed in 1984, of trade associations representing U.S. copyright-based industries working to improve international protection and enforcement of copyrighted materials and to open foreign markets closed by piracy and other market access barriers. Members of the IIPA include Association of American Publishers (www.publishers.org), Entertainment Software Association (www.theesa.com), Independent Film & Television Alliance (www.ifta-online.org), Motion Picture Association of America (www.mpaa.org), and Recording Industry Association of America (www.riaa.com). IIPA’s five member associations represent over 3,200 U.S. companies producing and distributing materials protected by copyright laws throughout the world. These include entertainment software including interactive video games for consoles, handheld devices, personal computers and the Internet, and educational software; motion pictures, television programming, DVDs and home video and digital representations of audiovisual works; music, records, CDs, and audiocassettes; and fiction and non-fiction books, education instructional and assessment materials, and professional and scholarly journals, databases and software in all formats.