A Study on the Korea Database Industry Promotion Act...

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A Study on the Korea Database Industry Promotion ActLegislation

ABSTRACTThe Database Industry Promotion Act was proposed at the National Assembly plenary session on July 26, 2012and since then it has been in the process of enactment in consultation with all the governmental departmentsconcerned. The recent trend of economic globalization and smart device innovation suggests a new opportunityand challenges for all industries. The database industry is also facing a new phase in an era of smart innovation.Korea is in a moment of opportunity to take an innovative approach to promoting the database industry. Koreashould set up a national policy to promote the database industry for citizens, government, and research institu-

ⓒ Seoung-Hun Bae, Jung-Sun Lim, Jae-Jin Lee, Cheon-Woong Park, Kwang-Min Shin, Sang-Kyu Kang, Jin-Sun Yoon, Minsoo Shin, 2013

Accepted date: September 23, 2013Received date: May 14, 2013

✻Corresponding Author: Minsoo ShinProfessor Business School Hanyang University, Korea E-mail: [email protected]

All JISTaP content is Open Access, meaning it is accessible onlineto everyone, without fee and authors’ permission. All JISTaP con-tent is published and distributed under the terms of the CreativeCommons Attribution License (http://creativecommons.org/licenses/by/3.0/). Under this license, authors reserve the copy-right for their content; however, they permit anyone to unre-strictedly use, distribute, and reproduce the content in any medi-um as far as the original authors and source are cited. For anyreuse, redistribution, or reproduction of a work, users must clari-fy the license terms under which the work was produced.

Open Access

http://www.jistap.orgJournal of Information Science Theory and Practice

J. of infosci. theory and practice 1(3): 60-73, 2013http://dx.doi.org/10.1633/JISTaP.2013.1.3.5

JISTaPTechnical Report

Seoung-Hun BaeKorea Institute of Science andTechnology Information, Korea E-mail: [email protected]

Jung-Sun Lim Korea Institute of Science andTechnology Information, Korea E-mail: [email protected]

Jae-Jin LeeKorea Database Agency Dept. of Strategy & Planning, Korea E-mail: [email protected]

Cheon-Woong ParkKorea Database Agency Dept. ofStrategy & Planning, Korea E-mail: [email protected]

Kwang-Min ShinKorea Institute of Science andTechnology Information, Korea E-mail: [email protected]

Sang-Kyu KangKorea Institute of Science andTechnology Information, Korea E-mail: [email protected]

Jin-Sun YoonKorea Institute of Science andTechnology Information, Korea E-mail: [email protected]

Minsoo Shin✻Business School Hanyang University, Korea E-mail: [email protected]

61 http://www.jistap.org

A Study on the Korea Database Industry Promotion Act Legislation

1. INTRODUCTION

As information technology (IT) develops, informa-tion systems become complex and diverse. The effectsof information systems on society and individual lifebecome extended. A database, a core infrastructurecomponent of information technology, is an aggrega-tion collecting and accumulating related sets of data tomake them available to be searched and used in vari-ous ways, and in order to develop our society into aninformation-based society with a focus on knowledge-based service (Park & Lee, 2009).

In a knowledge information society, a database isnot merely a simple assembly of data organized byconceptual structures of data, but an infrastructurefunctioning as a framework that stores and circulatesdata structurally and systematically (Bae et al., 2012).

The database industry provides services by analyzingand processing the accumulated data in a field thatmakes it possible for the effective creation and use ofinformation and knowledge throughout society. Thus,the database industry has both direct and indirecteffects on industry in general, let alone on hardware(H/W) and software (S/W) (Lee, 2003). The databaseindustry is developing as a high added value industryintegrating with various services as well.

Recently, data constructions by corporations anddata accumulations by social network service (SNS)are increasing geometrically. In the big data era inwhich large amounts of data are produced, the impor-tance of databases using big data and creating newvalue is gradually increasing.

However, the Korean database industry requires leg-islation and regulation to promote the industry, as ithas problems such as a lack of competitiveness fromsmall and medium-sized companies, a poor quality

management system, and an unbalanced demand/sup-ply of specialized manpower. It also lacks a promotionsystem to foster an independent industry (Bae et al.,2012). In Korea, laws relevant to databases are focusedon the database construction itself, and they only pro-vide legal ground for the subjects of production fromthe point of view of the database supplier, while in for-eign countries, legal systems have been fostering thewhole industry, supporting not only database con-struction but also the users of the database. To makethe database industry a core infrastructural componentof the knowledge information society and a high add-ed value industry in Korea, there should be a specialarrangement.

In this paper, we explain why and how the establish-ment of the Database Industry Promotion Act was car-ried out. In addition, we analyze the effects of the Da-tabase Industry Promotion Act and shed a light on thesocial background of the database act, and the legalcharacteristics and significance of the act. We analyzethe current issues that can be resolved through estab-lishment of the database act in the future, by explain-ing the structure and contents of the act as well.

2. DEFINITION AND CURRENT STATUS OFDATABASE INDUSTRY

2.1 Definition of Database Industry A database means an ‘aggregation of data,’ and is a

system that systemically accumulates serial data andprovides the data to be used in the right place in a time-ly manner (Law Firm Suho, 2009). As a tool to accu-mulate and manage geometrically increasing digitaldata, databases are in the same vein as informationiza-tion, along with developing information technology.

tions, as well as enterprises. Above all, the Database Industry Promotion Act could play a great role in promotingthe social infrastructure to enhance the capacity of small and medium-sized enterprises. This article discusses thebackground of the development of the Database Industry Promotion Act and its legislative processes in order toclarify its legal characteristics, including the meaning of the act. In addition, this article explains individual itemsrelated to the overall structure of the Database Industry Promotion Act. Finally, this article reviews the economiceffects of the database industry for now and the future.

Keywords:Database, Database industry, Database Industry Promotion Act

That is, in modern society, the database has a core rolein all fields in which informationization is being devel-oped (Park & Lee, 2009). Therefore, the definition of adatabase differs slightly depending on various perspec-tives. The International Standard Organization (ISO/IEC) defines a database as an assembly of data orga-nized by a conceptual structure that describes charac-teristics of the data and the relations between entitiesrelated to each data to support more than one appliedarea (ISO/IEC 2382-17, 1999), emphasizing the tech-nical aspects, while the World Intellectual PropertyOrganization (WIPO) defines it as a compilation ofdata or other material in every form by selection orarrangement of contents that compose intellectual cre-ation, emphasizing the aspect of a written work (WIPO-ESCWA, 2003). The Linux Foundation defines adatabase as a group of formal data composed so that acomputer can easily search data (The Linux Infor-mation Project, 2006). In the definition of database incurrent law, whether or not effective search and use areavailable is a standard metric in deciding the value of adatabase. In copyright law (revised in 2011), a databaseis defined as a “compilation that systematically arrang-es or composes material that separately approaches tothe material or that can search the material,” differentfrom a written work (Bae et al., 2012). Like the above,the stream of informationization is recently changingfrom focusing on database construction to uses of da-tabases, and the definition of a database is evolving fol-lowing the change of the times. While accumulatingand storing a large amount of data was an importantperformance of a database in the past, recently, howeffectively data can be searched and used has become aparameter in deciding the value of a database, let alonethe total amount of data.

The database industry is a field that provides ser-vice by searching and using established databases,and according to the Database Industry PromotionAct which will be addressed, the database industry isdefined as an “industry that provide service related toproduction of databases to create economic value”

(Law Firm Suho, 2009), and the Korea Database Agen-cy defines the industry as an “industry that constructsand systemizes a database with digitalized data, contin-uously operates and manages the database, and makesthe accumulated database a more valuable product andprovides the service by analyzing and processing inorder to lead a business” (Bae et al., 2012). In otherwords, the database industry consists of four sectors,including database construction which converts theanalogue data into digital data, makes a database, andconstructs a system; DBMS, a database service thatprovides information on various subject areas usingthe stored data; a database solution that develops andmaintains solutions for using databases, such as searchengines; and database consulting that performs systemor business consulting based on databases. Amongthese elements, database service is closely related withdatabase solutions. However, there is a difference be-tween database service and database solutions. Forexample, firms delivering database service may pro-vide weather information services using weather data-bases or legal information service using legal databases.Firms delivering database solutions are such as Oracleand SAP. According to Korea Standard Industrial Cla-ssifications (KSIC), database services includes portals,Internet infomediary businesses, news supply busi-nesses, and online information supply businesses.Database solutions includes application software de-velopment and supply businesses, computer program-ming service businesses, computer system integrationand consulting businesses, and information processingbusinesses.

As above, the database industry is an integrated in-dustry group that supports related businesses focusedon databases, and is closely related to the contentsindustry (or of the service providing the contents, in-cluding combinations of both) and the software indus-try.1 Recently in academic legal circles, databases areregarded as an independent industry, while databasesdealt with in these industries have limited subjects anddo not enclose the databases themselves, and as such

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JISTaP Vol.1 No.3, 60-73

1 Software Industry Promotion Act, Article 2 (Definition): The “Software industry” is an industry related to the development, making, production, anddistribution of software and related services, and the construction and operation of information systems by the “E-Government act,” Article 2, No. 13

the industry is regarded as an integrated one that alsofunctions as infrastructure in all industries.

2.2 Current Status and Trend of Database In-dustry

2.2.1 Current status of Korea database industryThe Korean database industry was valued at 11 tril-

lion won in 2012, having grown by 6.09% year on year,and it is expected to grow by a 8.2% annual averagesince 2010, and is projected to exceed 14 trillion wonin 2017 (Korea Database Agency, 2012). This growthrate is over 2.5 times the rate of Korea GDP growth in2012, showing that the database industry has a highergrowth rate than other industries. When the industryis segmented, the database construction market value

was 4 trillion, 512 billion won, growing by 6.4% since2011, and the database service market was 4 trillion,484.7 billion won, growing by 3.8% year on year, ac-counting for 40.7% of the database industry market.Database solution market value was 1 trillion, 746.7billion won, growing by 10.6% since 2011, 36.8% ofthis being in security solutions. While the databaseconsulting market is the smallest area in the databaseindustry, it grew into a 263 billion won market, record-ing a high growth rate of 7.9% (Korea Database Agen-cy, 2006).

Based on 2011, the number of companies in the da-tabase industry in Korea is estimated to be about 5,300(Park et al., 2011), and the annual revenue of most ofthem are less than 10 billion won. In the database con-struction area, about 85% of companies make annual



Fig. 1 Classification of database industry. Reprinted from Policy plan for promotion of database industry, 2012

Table 1. Annual size variation of Korean database industry market (Unit: 100 million KRW)

Item 2010 2011 2012

36,610

42,242

12,983

2,253

42,374

43,218

15,800

2,437

45,120

44,847

17,467

2,630

Total 94,088 103,829 110,064

Note: From 2012 Database industry market analysis result report, 2012

DB construction

DB service

DB solution

DB consulting

revenues of less than 10 billion won, and more than35% of companies’ revenue was less than 2 billionwon.

In the database service area, more than 90% of thecompanies have annual revenues of less than 10 billionwon, and the annual revenues of 55% of companieswere less than 1 billion won. However, as databaseconsulting and solution companies did not disclosetheir sales amounts accurately, numbers were difficultto estimate (Korea Database Agency, 2011). On theother hand, recently Korean database companies areactively entering the overseas market, most of themdatabase solution and consulting companies, andexports in 2011 were found to reach 479 billion won(Ministry of Culture, Sports and Tourism, 2011).

The total manpower working in the database indus-try in 2012 was 230,000 people, an increase of by 5%from 2011. The number of people who directly dealwith databases was found to be 61,230 (Korea DatabaseAgency, 2012). According to the Korea Database Agen-cy, average revenue per person related to databases was179.64 million won, about 6.5 times GDP in 2011 (23,749

dollars), showing that the database industry is a highefficiency industry with high productivity (KoreaDatabase Agency, 2011).

2.2.2 Current status of overseas database industry Overseas database service market value was 506 bil-

lion dollars in 2012, growing by 3.3% year on year(Fooladi et al., 2013). In the service market, new infor-mation accounted for 82.9 billion dollars, being thelargest sector, followed by web search at 64.9 billiondollars, and education and training at 64.4 billion dol-lars. Especially, HR information showed the highestgrowth rate of 19.1% year on year, with web searchshowing 17.3% growth rate year on year. However,news information declined by -6%, and yellow pagedirectory information declined by -4%. Table 2 showsmarket size by database service worldwide.

The biggest company in the database service marketis Google, with revenues of 46 billion dollars in 2012,followed by Thomas Reuters with 13.1 billion dollars.Especially, Google is settling down as the major com-pany in the search syndication market, with over 20%

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Table 2. Worldwide database service market by area (Unit: Billions of Dollars,* %)

Item Market Growth rate

25.1

4.6

46.3

35.8

55.8

64.4

6.1

18.2

41.0

82.9

31.4

64.9

4.0

26.5

506.0

3.5

6.0

1.2

1.3

6.0

4.9

19.1

4.0

6.0

-6.0

5.4

17.3

-3.8

-4.0

3.3

Note: From Information industry market size & share rankings: Preliminary 2012 results. Outsell. 2013* Annual average exchange rate of 2012: 1,113.47 KRW/dollar

B2B Trade Publishing

Company Information

Consumer Books

Consumer Magazines

Credit & Financial Information

Education & Training

HR Information

Legal, Tax & Regulatory

Market & IT Research

News Providers & Publishers

Scientific, Technical & Medical Information

Web Search

Licensed Content Aggregation & Syndication Service

Yellow Pages & Directories

Total Information Industry

of annual growth. Among Korean companies, NHNgrew by 101.6% year on year, with revenues of 2.5 bil-lion dollars. As China continues to emerge as a newstronghold in the database service market, Baidu.comwas ranked seventeenth, with revenues of 3.5 billiondollars.

The worldwide market size of DBMS, the represen-tative database solution, was about 24 billion dollars in2011, growing by 5.4% year on year (Korea DatabaseAgency, 2012). The data integration market grew from3 billion dollars in 2010 to 3.5 billion dollars in 2011,expanding by 13.9%. The data integration market con-sists of data quality management and master datamanagement. The BI (Business Intelligence) solutionmarket was found to have increased by 9.8% from 10.5billion dollars in 2010 to 11.5 billion dollars in 2011.When the BI solution market is segmented, the BIPlatform market was 6.7 billion, the CPM market was2.2 billion, and the analytics market was 1.7 billion dol-lars. Especially, the ratio of the analytic market wasfound to have been extended in the BI solution market(Korea Database Agency, 2012).

2.3 Problems of Database IndustrySeveral problems are being exposed in fostering a

Korea database industry. Poor related legal systems, alack of manpower, poor quality management, and dis-torted service eco-systems are major problems.

To foster and promote the database industry, basicelements like organization, manpower, and budgetingshould be supported, but a systematic environment forfostering the database industry is lagging far behind.Especially, from the aspect of law, databases have simi-lar regulations in some legislation, but they are notsolid enough to support business initiation. And thusthere is no legal system which integrates the industry.In most laws, only the construction of the database isregulated, and the construction is stipulated to be thediscretion of the state or the head of an organization.As there is no restrictive regulation regarding failure ofconstruction, numerous difficulties impede the devel-opment of a systematically fostered database industry.Therefore, an independent law that generally specifiesthe database industry is required.

Second, even though the database industry needs alarge quantity of specialized manpower from database

planning and management for operation, insufficientpolicies for fostering database specialists is also a majorcause that impedes the growth of industry (Bae et al.,2012). In this situation, on database industry sites, man-power is fostered by themselves. However, this is accom-panied by high costs and time spent, and employingnew employees is difficult. According to a survey, atotal average of 60,880 thousand won per person is thecost for an IT company to employ a new employee andtrain the employee (Ministry of Security and PublicAdministration, 2012). Therefore, a mid and long termstrategy to foster special manpower needs to be estab-lished, and cooperation between industry and educa-tion should be systematically regulated to maintain aconsistent cooperative relationship.

Third, acknowledgement of the need for databasequality management is gradually spreading, but qualitymanagement systems are still insufficient (Bae et al.,2012). It was found that a social cost accounting of 46trillion, 900 billion won is incurred as an annual aver-age economic loss (Bae et al., 2012). In addition, thenumber of data errors occurring due to insufficientquality management is estimated to be over 65 millioncases in public agencies, and 43 billion cases in privatecorporations (Korea Database Agency, 2010), with ahigh average database error rate of 4.38% (Korea Data-base Agency, 2012).

Fourth, the service eco-system is distorted. The aver-age revenues of 55% of database service companieswere less than 300 million won, and the types of data-bases served number about 2,000, tied up for the last 5years (Law Firm Suho, 2009). More than half out of 51service providers provide databases for free via portals,and 93% are not getting properly paid (Korea Data-base Agency, 2012). This demonstrates not only theneed for a legal regulation to solve this problem, butalso an independent organization that mediates, settles,and assesses these problems for win-win partnerships.

3. ECONOMIC EFFECT OF DATABASE INDU-STRY

3.1 Economic Effects of Database IndustryIndustry analysis was used to measure the economic

effect of the database industry. Industry analysis in-



volves a comprehensive statistical table that records alltransactions related to the production and disposal ofgoods and service occurring in an economy during acertain period (usually one year) in a certain principleand form, and it is widely used as basic data for theestablishment of various economic policies and foreconomic and industrial analysis. Mutual linkage ofthe database industry and other industries can be fig-ured out using this industry analysis, and the econom-ic effect of demand for the database industry on thewhole industry can be evaluated (Park et al., 2011).

Industry analysis presumes that the input coefficientis always consistent and the supply of raw material isalways flexible, and the input coefficient mediates thefinal demands and is exogenously determined, likewith consumption, investment, and export and grossoutput. From the perspective of the whole nationaleconomy, the production activity of each industry ismade ultimately to fulfill final demand.

To make an industry analysis, the industry closelyrelated to the database industry on the input-outputtable was identified to estimate the industry related todatabases. Classification of the database industry basedon Korean standard industry classification was com-pared with basic areas on the input-output table andadjusted for this study.

3.1.1 Production inducement effect If there are many areas in an industry, using an

input coefficient to measure the production induce-ment effect that is infinitely continued is difficult, thus

the production inducement coefficient can be deduct-ed using an inverse matrix.

𝑎11𝑿1+𝑎12𝑿2+ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ +𝑎1𝑛𝑿𝑛+𝑌1−𝑀1=𝑿1

∙∙∙

𝑎𝑖1𝑿1+𝑎𝑖2𝑿2+ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ +𝑎𝑖𝑛𝑿𝑛+𝑌𝑖 −𝑀𝑖=𝑿𝑖

∙∙∙

𝑎𝑛1𝑿1+𝑎𝑛2𝑿2+ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ +𝑎𝑛𝑛𝑿𝑛+𝑌𝑛−𝑀𝑛=𝑿𝑛

𝑎𝑖𝑗 is input coefficient, 𝑿𝑖 is output in i area, 𝑌𝑖 isfinal demand in i area, and 𝑀𝑖 is income in i area.

𝑿=[𝐼−(𝐼−𝑚⌃ )𝐴]-1[(𝐼−𝑚⌃ )𝑌 ✽+𝐸]

X is gross output vector, A is input coefficient mat-rix, Y is final demand, E is export, and m is importcoefficient. Here, the [𝐼−(𝐼−𝑚⌃ )𝐴]-1 matrix is the pro-duction inducement coefficient. The production in-ducement coefficient means the direct and indirectproduction effect induced in each industry area to ful-fill one increased unit of final demand.

The production inducement coefficient of the data-base industry based on the above is estimated to be1.838, which means that a production of 31 trillion,790.9 billion won is required to fulfill the financialdemands of 17 trillion, 291.9 billion won (Park et al.,2011).

3.1.2 Added value inducement effectA production inducement coefficient table was used

to deduct the interaction formula showing interac-tion between final demand and added value. When

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Table 3. Database industry classification on input-output table

Industry area

Large classification (28) Telecommunication and broadcasting (22) Real estate and business service (24)

Medium classification (78) Telecommunication (62) Special business service (67)

Small classification (168) Value added telecommunication andinformation service (142) Computer related service (153)

Basic area (403) Information service (345)Softwaredevelopment supply (366)

Computer related service (367)

Classification

added value vector is (𝑉 ) and diagonal matrix of add-ed value coefficient is (𝑉⌃ v), relation of 𝑉=Âv𝑿 is estab-lished. Therefore, when the production inducementinteraction formula substitutes in this formula, the for-mula of 𝑉=Âv[𝐼−(𝐼−𝑚⌃ )𝐴]-1𝑌 𝑑 is obtained and in this for-mula, Âv[𝐼−(𝐼−𝑚⌃ )𝐴]-1 is the added value inducementcoefficient matrix. The added value inducement coeffi-cient is the sum of added value directly and indirectlyin-duced in a whole national economy when one unitof final demand for domestic production occurs in an

industry area (Korea National Bank, 2011). The addedvalue inducement coefficient of the database industryis 0.872, which means that 15 trillion, 284.6 billionwon of added value is induced when the final demandof 17 trillion 292.9 billion won is fulfilled (Park et al.,2011).

3.1.3 Employment effectTo deduct the labor inducement coefficient, the

demand equation between final demand and grossoutput, used to calculate the production inducementcoefficient explained above, was multiplied by thediagonal matrix of labor coefficient (𝑙⌃=𝐿/𝑋) to estab-lish 𝐿=𝑙⌃[𝐼−(𝐼−𝑚⌃ )𝐴]-1𝑌 𝑑. Here, 𝑙⌃[𝐼−(𝐼−𝑚⌃ )𝐴]-1 is theemployment inducement coefficient. As for the laborinducement effect by final demand item, the laborinducement coefficient matrix was multiplied by thefinal demand vector of consumption, investment,and export to measure labor inducement count𝐿w=𝑙𝑙⌃w[𝐼−(𝐼−𝑚⌃ )𝐴]-1𝑌 𝑑 by final demand item.

The employment inducement demand can be ana-lyzed by the two aspects of employee and employer.2

The employment inducement coefficient means labordirectly and indirectly induced in the productionprocess, including not only labor directly needed inone unit of product in a certain industry (labor coeffi-cient), but also the labor indirectly induced during theproduction process (Korea National Bank, 2011). Theemployment inducement coefficient of the databaseindustry is 13.177 persons per 1 billion won, with anestimated total employment inducement of 337,475persons (Park et al., 2011).

3.2 Economic Effect of Establishment of Data-base Industry Promotion Act

To measure the economic effect of the establishmentof the Database Industry Promotion Act, a survey wasgiven to 82 corporations that are located in Korea andprominent in the database business.

From the survey, the average investment by corpo-rations related to databases to the database industrywas estimated at 1.9 billion won and, after legislation,this was expected to increase by 38.5% to 2.68 billionwon. Therefore, each private corporation is expectedto make an additional annual investment of an average750 million won in the database industry through theestablishment of the Database Industry PromotionAct. Accordingly, from a minimum of 2 trillion, 787.8billion won to a maximum of 5 trillion, 119.8 billionwon of economic effect is projected (Park et al., 2011).Production inducement effect is estimated from aminimum of 5 trillion, 123.9 billion won to a maxi-mum of 9 trillion 410.1 billion won. The added valueinducement effect is estimated to be from a minimumof 2 trillion, 430.9 billion won to a maximum of 4 tril-



2 Including employee, small business owner, and unpaid family employee

Table 4. Economic effect of database industry

Item Productioninducement effect

Added valueinducement effect

Employment inducement effect

Whole industry average

Database industry

1.940

1.838

0.722

0.872

18.354persons/1 billion won

13.177persons/1 billion won

Whole industry average

Database industry

lion, 464.4 billion won (Bae et al., 2012). The employ-ment inducement effect is additionally estimated froma minimum of 36,735 persons to a maximum of 67,464persons of employment expected, showing an averageof 52,099 persons in job creation effect (Bae et al.,2012).

3.3 Database Use Effect When economic effect by database use is indirectly

estimated through database use effect in the public sec-tor, in Europe, the economic effect on EU (EuropeanUnion) member countries by use of public informa-tion in the private sector is estimated to be 61 trillionwon (40 billion EUR) a year, and when direct and indi-rect economic effect is considered together, it is ex-pect-ed to be 211 trillion won (140 billion EUR) a year(Graham, 2011). In Korea, systematic policies are be-ing established for the introduction and use of infor-mation and data in the public sector, and the econom-ic value following the use of public information is esti-mated to be about 1 billion won (Korea DatabaseAgency, 2006).

4. DATABASE INDUSTRY PROMOTION ACT

4.1 Current Status of Laws Related to Data-base Industry

4.1.1 Korean statusCurrent Korean law regulates database construction,

but there is almost no legal base regulating industryfostering or support. Copyright law and national spaceinformation law directly defines database componentsas including information structure, information sys-tems, information telecommunication bases, and link-ed subjects. Table 6 shows the current status of domes-tic laws that includes databases.

Domestic laws related to database use are focused onthe database construction itself, and they merely pro-vide legal ground for the subjects of production fromthe point of view of database suppliers. Database con-struction is regarded as a right or discretion from thepoint of view of the database supplier, and databasesare regulated as a subject of construction only in public

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Table 6. Classification of domestic legislation related to databases

Note: From Study on improvement of legal system for DB industry advancement, 2009

Related law

Copyright law Article 2, No. 19National space information law Article 2 No. 2

Weather law Article 2 No. 14Law of protection and use of location information, Article 2, No. 8

Basic act of state informationization, Article 3, No. 15

Basic act of logistics policy, Article 30, clause 1

Item

Table 5. Economic effect following establishment of Database Industry Promotion Act (Unit: 100 Million KRW)

ItemMinimum

investment costAverage

investment costMaximum

investment cost

27,878 39,538 51,198

51,240

24,310

36,735 persons

72,671

34,477

52,099 persons

94,102

44,645

67,464 persons

Production inducement effect

Added value inducement effect

Employment inducement effect

Direct definition regulated

Information system

Information telecommunication base

Construction and linked subjects

sectors such as government, or in facilitating a con-struction program of a constructor like a government.As there are no restrictions governing fulfilling theresponsibilities of database construction, they are justdeclarative regulations. Moreover, there is no adminis-trative or legal ground at the provincial/state level forquality management, distribution support, industryfostering, or other restrictions. Regarding database dis-tribution applicable to the private sector, protectionregulation of databases is just specified by copyrightlaw, enabling settlement by damage compensationbased on precedents or protection of databases withoutcreativity or according to an act of unfair competitionprevention. Therefore, a review of unbalanced databaseregulation is needed again from the aspects of produc-tion, management, use, and industry, and establish-ment of database legislation is needed so that activitiescan be conducted organically in various areas.

4.1.2 Current status in foreign countriesWhen we studied systems related to databases in

foreign countries, their legal systems were fosteringtheir whole industry, supporting not only database con-struction but also users of the database.

Japan is fostering and promoting their whole indus-try, supporting not only suppliers’ production man-agement but also distribution management from thepoint of view of users (Kim, 2011).

Considering the social effect of information sharingand disclosure, the USA mandates database construc-tion not only in the public sector but also in the privatesector for specific issues, and regulations to enforce con-tinuous database quality management have been es-tablished. At a federal level, information quality man-agement of all federal government departments wassystemized through establishment of the InformationQuality Act (Law Firm Suho, 2009).

The EU is trying to maximize the value of databaseuse through legal protection of databases and open datapolicy in the public sector, and in 2003 a directive on

reuse of public information was established to stipulatethe use of public information by the private sector, andin 2011, the reuse of public information and data wasmandated through a data open policy (Graham, 2011).

As mentioned above, domestic database-related lawsare focused on database construction itself, and there isalmost no regulation on database industry fostering anduse. And there is almost no law on data quality manage-ment and support for industry promotion or elementsto enhance usability of constructed databases. On theother hand, in major countries, databases are recognizedas an important form of media that realizes fulfillmentof publically beneficial obligations like the distributionand use of information, not as an asset, and related reg-ulations are being modified (Law Firm Suho, 2009).

4.2 History of Legislation Related to DatabaseIndustry

Regulation on databases first appeared in 1994, in apartially amended copyright law, and databases havebecome the subject of legal protection since then. How-ever, at that time, copyright law regulated a compila-tion work as a creative compilation of materials orarrangements,3 so databases were not applicable to thisregulation and were not protected. Therefore, the needfor an independent legal system for database protec-tion was addressed and in 1996, a law of database pro-tection and promotion was proposed for the first timein the National Assembly, but the legislation failed dueto conflicts on legal provisions between departments(Kim, 2011).

During the time that claims were being continuallymade by creators that database protections undercopyright law were insufficient, the “Mirae informa-tion incident”4 occurred and the need for databasemaker protection strongly emerged. Motivated by thisincident, an ‘Act of Database Protection and Use’ wasproposed in 1999, with the opinion that a law embrac-ing the protection of investment in database making isrequired; however, it was discarded when the National



3 A collection of theses, figures, shapes, and other materials, or something systematically composed for searching using an information processingdevice.

4 A real estate association illegally copied the database of Mirae Information, a database provider serving real estate information to real estate brokersin the Ilsan area in the Kyeonggi-do region. Mirae Information gave up their whole business due to this incident.

Assembly term expired. After the legislation failed in1999, the responsible department at that time, the Mi-nistry of Information and Telecommunication, pre-announced legislation (Ministry of Information andTelecommunication Notification No. 2001-5), but inthe process of opinion adjustment with the Ministry ofCulture and Tourism, a settlement was made to revisecopyright law, nevertheless failing to make final legisla-tion (Bae et al., 2012).

In 2011, as revenues of the database industry exceed-ed 10 trillion won, the industry emerged as one with ahigh market contribution and employment effect. How-ever, government agencies and the National Assemblyremain in discussion over the opinion that an inde-pendent law is needed to systematically foster and sup-port the database industry. In industry and the acade-mic sector also, the necessity to prepare a legal systemrelated to databases has been addressed. Therefore, onJune 1, 2011 the Database Industry Promotion Act wasproposed and subsequently introduced in the NationalAssembly on December 23, but it was discarded as theterm of the National Assembly had expired.

Even though the database act was discarded due tothe last National Assembly’s term expiration, as con-

sensus on the need for a database related law spreadsin the National Assembly, government, corporations,and the academic sector, the act was proposed againon July 26, 2012. However, the department responsiblefor the database industry was integrated into theMinistry of Science, ICT, and Future Planning, and itwill be supplemented with the act of database industrypromotion and proposed again in May 2013.

When the flow of steps from the law of databaseprotection and promotion proposed in 1996 to thepresent proposed Database Industry Promotion Act isstudied, the direction of the legal system can be seen tobe changing from a focus on protection and facilitationof database use to the fostering of industry that facili-tates the use of databases.

4.3 Main Subjects of Database Industry Pro-motion Act

The Database Industry Promotion Act planned forproposal again in May 2013 consists of 4 chapters, 23articles, and supplementary provisions, includingchapter 1, general rules; chapter 2, database industrybase construction; chapter 3, database industry foster-ing; and chapter 4, penalties.

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Fig. 2 Scope of Database Industry Promotion Act. Reprinted from Improvement plan of legal system for DB industry fostering,rearranged, 2011

4.3.1 ProductionThe production area consists of standards imple-

mentation and quality management. Article 8 and 15apply to standards setting, and articles 9, 10, and 11apply to quality management.

Article 8 (standardization) contains activity supportfor industrial standardization required in making andusing databases, quality improvement, and securementof compatibility, and article 15 (actual conditions sur-vey) contains an actual conditions survey for moreeffective performance of the database industry.

Article 9 (quality improvement) contains databasequality improvement plans like database quality stan-dard and examination plans, and article 10 (qualitycertification) contains quality certification for databasequality securement and distribution facilitation. Especi-ally, article 11 (security management) contains subjectsrelated to database security management to respond todata security accidents.

4.3.2 DistributionThe distribution area consists of making and using,

distribution support, and international cooperationand support for overseas market expansion.

Article 7 (support to database making) regulates thepreparation of support plans for database makers andbusinesses, and article 21 (activation of convergencedatabase) regulates the preparation of base regulationfor convergence of the database industry and otherindustries.

Article 16 (database distribution support) stipulatesa support plan to activate database distribution, andarticle 18 (establishment and recommendation ofcompensation calculation standards) regulates inter-national cooperation for support of overseas marketexpansion of database industry overseas market ex-pansion support projects.

4.3.3 Human resourcesIn the human resource area, article 13 (fostering spe-

cialized manpower) stipulates support for specializedmanpower fostering by developing and improvingactual job ability through job standards preparation,cooperation between industry, and education and sup-port for related education, as demand for database spe-cialist manpower increases.

4.3.4 FinanceThe Finance area consists of technical development

and funding. Article 12 (facilitation of technical development)

contains continuous support for research and develop-ment by government to secure database related tech-nology and management, procurement technologytransfer, and information exchange facilitation of relat-ed technology information, and article 19 (commer-cialization support) regulates contribution to technolo-gy development activation by stipulating economicsupport by government for commercialization of coretechnology.

Article 5 (funding) stipulates that the governmentshould make efforts to prepare funding required tofoster the database industry.

4.3.5 FosteringThe fostering area consists of planning, execution

and restrictions, support for various subjects, demandand use of management, supply, and management cre-ation.

Article 3 (establishment of basic plan) regulates set-ting up basic plans for database industry promotion,and article 4 regulates establishment and execution ofthe executive plan according to basic plans related tothe database industry.

Article 22 (protection of material data) stipulatespreparation of protective plans for material data usedin databases, and article 24 (prohibited act) regulatesprotection of database makers by listing prohibitedacts in order to protect the value of the database.

Article 25 (penalty) regulates protection of materialdata and punishments to deter database system falseattacks, and article 22 (establishment of Korea Data-base Promotion Agency) provides a ground of estab-lishment for specialized authority to foster the data-base industry.

Article 17 (securing fair trade order) regulates pre-paration of an automatic support environment to con-struct and distribute databases, and article 20 (registra-tion of database business) regulates database businessregistration in order to manage business results ofdatabase corporations and manpower history.



5. CONCLUSION

Today, we can see and feel that the world economyis rapidly changing. Databases are not just simple in-formation constructed in your computer like in thepast, but are an important information source that canbe used anytime and anywhere by processing the data-base into useful information. Databases are changingour way of life and culture (Lee, 2007).

In 2012, revenues of the database industry exceeded11 trillion won, and the importance of the industry isincreasing as a core industry, showing a high yearlygrowth rate exceeding 6.0%.

However, the Korean database industry has prob-lems including low competitiveness of small and medi-um size companies, poor quality management sys-tems, and a lack of specialized manpower. First, ac-cording to the 2012 Korea database industry marketanalysis result report provided by the Korea databaseagency, Korean database service providers with annualsales around a mere 170 million won occupy 56% interms of the number of database service providers yetoccupy only 4.2% of the Korean database market. Avicious circle is perpetuated in the unfair trade envi-ronment where conglomerates are monopolizing themarket. Database service providers with annual salesover five billion won take 11.1% in terms of the num-ber of database service providers and occupy over 80%of the Korean database market. In addition, small andmedium-sized database service providers are not de-manding fair compensation when providing databaseservices for large portals. While they are experiencingdifficulties in finding a new market, such large portalsare launching very similar database services. Thus, thesurvival of small and medium-sized database serviceproviders is being threatened.

Data loss recovery costs have reached 46 trillion, 900billion won, and according to the 2012 Korea databaseindustry market analysis result report by the Koreadatabase agency, the accumulated database error ratein private and public organizations’ databases from2004 to 2011 reaches 4.38%, causing economic loss ingeneral society. Here, the database error rate is an esti-mate of errors introduced during data entry and clean-ing. The estimate of this rate can be obtained by count-ing the number of errors which occur, for example,when entering numbers where characters should be

entered, and dividing it by the total number amount ofverified data. While 28,800 persons of medium andhigh quality database manpower are needed by 2014,only 2,300 persons of medium and high quality man-power graduating from college will be available, ashortfall of 26,400. Therefore, a legal ground for re-solving general problems of the database industry likeabove, to create a sound database eco-system, and toconstruct a virtuous circle, should be prepared throughthe Database Industry Promotion Act.

As large amounts of data is produced, distributed,and shared by the expansion of smartphones and SNS,corporations recognize data as a core asset, and theimportance of databases is ever increasing through thetechnical support of transfers, storage, protection, con-vergence and copies of data and the acceleration ofknowledge distribution. Therefore, a legal basis shouldbe established so that databases with increasing impor-tance can be protected and used under a database act.

In 2011, the size of the database industry was esti-mated to be 10 trillion, 400 billion won, and a produc-tion inducement of 31 trillion, 800 billion won and anadded value inducement of 15 trillion, 300 billion wonwere estimated, with a huge effect on the Korean econ-omy. When the law is enacted, investment in databasecorporations will expand and a 4 billion person em-ployment inducement effect is expected. As above, theDatabase Industry Promotion Act will increase thefuture value of the database industry and support theactive vitality of the Korean economy by expandingthe role of the database industry.

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