Hello, this is Attorney Kim Kwang-sik from the law firm Cheongchul.

The recent ruling by the Supreme Court regarding whether the reproduction of music files provided by a background music service provider through webcasting (streaming) in a store constitutes copyright infringement has significant implications. In particular, this decision presents an important criterion surrounding the legal interpretation related to the limitation of the performance rights of the copyright holder under Article 29, Paragraph 2 of the Copyright Act, which has great significance in the field of music copyright. We will examine the details of the case and the court's judgment below.

[Question]

What are the criteria for determining whether the copyright holder's performance rights are limited under copyright law?

[Answer]

1. Case Overview

The plaintiff, a music copyright trust management entity, allowed the music works they manage to be used for background music services through webcasting (streaming) via contracts with background music service provider A and others. However, the plaintiff did not grant separate permissions for the performance rights.

The background music service provider A entered into a contract with the defendant, who operates a public restaurant, and obtained the same music files as those sold in stores from a music supply provider, storing them on their own server. Subsequently, they converted these music files into different formats by employing technical measures such as encryption and format conversion, setting them to be played only in the defendant's store. The music channel configured in this manner was provided to the defendant's business-related background music service system through webcasting.

The defendant played the music received from A in their store as background music but did not receive any separate compensation from customers for the music playback. Therefore, the plaintiff claimed that the defendant's actions constituted an infringement of performance rights under copyright law and sought damages equivalent to performance fees and restitution of unjust enrichment.

2. Summary of the Lower Court's Judgment

The lower court did not accept the plaintiff's claims. First, it concluded that the music files stored on A's server, obtained from the music supply provider, constitute 'phonorecords' under copyright law. It also determined that the defendant's playback of these music files in the store equated to 'performances' under copyright law.

However, the lower court deemed that the music files stored on A's server were records produced for the purpose of being sold. Such records correspond to 'records for sale' (current law refers to them as 'commercial records') under the former Copyright Act, leading to the conclusion that the defendant's act of performing the music publicly does not constitute copyright infringement.

Thus, the lower court concluded that since the defendant did not receive any separate compensation (payment for the performance) from visiting customers while playing the music in the store, the copyright holder's performance rights are limited. Consequently, it dismissed both the plaintiff's claims of performance rights infringement and the damages request.

3. Supreme Court Judgment

The Supreme Court reversed the lower court's decision, concluding that the defendant's actions constituted copyright infringement (Supreme Court Decision 2025. 1. 23. 2023Da290386). The Supreme Court first presented the following legal principles regarding the interpretation of Article 29, Paragraph 2 of the former Copyright Act.

Article 29, Paragraph 2 of the former Copyright Act stipulates that using recordings or video works for non-profit performances does not constitute copyright infringement. However, the Supreme Court emphasized that the interpretation of this provision must be strictly conducted to avoid unjustly harming the legitimate interests of the copyright holder.

In particular, regarding the concept of 'records for sale' in Article 29, Paragraph 2 of the former Copyright Act, it should be interpreted restrictively as referring to records produced for commercial sale. There is an underlying assumption that records can be sold more widely through their playback, thereby indirectly guaranteeing the copyright holder's interests. Therefore, cases where the purpose of production is not commercial sale are less likely to be regarded as 'records for sale.'

The Supreme Court found that the targeted music files provided by A to the defendant were digitized and reproduced for the purpose of providing background music services and did not qualify as records produced for sale. Just because a music file is digitized does not mean it can all be regarded as a record for sale; it is essential to distinguish whether the production purpose is for commercial sale or for a specific service (background music service provision).

Therefore, the corresponding music files do not fall under the definition of 'records for sale' as stated in Article 29, Paragraph 2 of the former Copyright Act, thus it was determined that the copyright holder's performance rights are not limited.

Accordingly, the Supreme Court ruled that the defendant's act of playing the music in the store constitutes an infringement on the plaintiff's performance rights, reversing the decision of the lower court.

4. Legal Interpretation and Implications

This ruling by the Supreme Court carries the following legal significance.

First, it is significant in that a strict interpretation of the concept of 'records for sale' was achieved. The Supreme Court clarified that merely digitizing music does not categorically classify it as records for sale; the judgment must hinge on whether the intended production purpose is for commercial sale or for specific service provision. This becomes a crucial standard for how music provided through background music services and online streaming services will be protected under copyright law.

However, the current copyright law revisions define 'commercial records' to clarify the scope of 'records for sale' under the former Copyright Act. If the purpose of the service under commercial contracts aligns with that of 'commercial records,' a possibility exists for interpretation as such, and there is currently no established Supreme Court precedent regarding this. Therefore, it is essential to pay attention to upcoming Supreme Court rulings on the judgment standards for 'commercial records.'

Second, this ruling emphasizes again that Article 29, Paragraph 2 of the copyright law acknowledges the limitations of performance rights for non-profit performances, but asserts that the application conditions must be strictly interpreted based on the purpose of record production and usage. This can be seen as a reflection of the reality that music in a digital environment can be produced differently for commercial sale or specific service purposes.

Third, this ruling provides important legal standards for both background music service providers and users. Particularly, it clarifies that if the music played in stores is not just simple records for sale but rather music produced for specific purposes, issues of copyright infringement on the performance rights of the copyright holder could arise. This conveys the message that businesses need to be more aware of copyright protection.

5. Conclusion

Thus, the Supreme Court reversed the lower court's decision and concluded that the defendant's act of playing music infringed on the plaintiff's performance rights. This case clarifies that music provided in background music services cannot simply be regarded as records for sale, constituting a strengthening of the copyright holder's rights. Going forward, background music service providers should take this ruling into account and exercise greater caution in entering copyright-related contracts and operating their services.

Attorney Kim Kwang-sik has extensive experience in the field of intellectual property (IP), including copyright law, as a former attorney at Kim & Jang Law Office.

Based on advisory experience with numerous companies and content service providers, he offers tailored legal advice regarding copyright infringement disputes, content contracts, and IP protection strategies.

If you need legal assistance regarding copyright issues or IP, please feel free to consult.