Law Firm Veat – “Software Promotion Act” Takes Effect

Following the 4th Industrial Revolution, measures have been taken to promote and invest in the software industry and to reform and improve unfair software business practices. The “Software Promotion Act,” completely revised in 2020, has been in effect since December 10th.

Beyond the promotion of the “Software Industry,” it aims to strengthen national software capabilities by spreading software nationwide. The law was revised from the “Software Promotion Act” to the “Software Promotion Act,” and expanded from 4 chapters and 48 articles to 8 chapters and 78 articles, including supplementary provisions, to address previously vague and unprotected areas. Numerous articles were added to clarify and improve understanding.

Key revisions of the “Software Promotion Act” include:

• Regional Software Industry Promotion Agencies

According to Article 9 (“Regional Software Industry Promotion”), the designation criteria and delegated business items of regional software industry promotion agencies are defined to support regionally-based software industry promotion and to facilitate integration with local industries.

• Introduction of Private Investment Software Business

Based on Article 40 (“Private Investment Software Business”), the legal basis for promoting software businesses by utilizing private capital and technology of the public sector was introduced, and the implementation regulations outlined business requirements and procedures.

Software Business Environment Improvement

• Terms of Contract for Software Business

According to Article 38 (“Principles of Fair Contracts”), both parties to the contract must be in an equal position to ensure a fair contract is executed, and the contract shall be established based on software business contracts. The contract should include details such as task content confirmation methods, confirmation times, contract amounts, contract periods, contract content changes, compensation for damages, and ownership of intellectual property. Additionally, to strengthen fairness, clauses for invalidating contracts that are unfairly one-sided are included.

• Ban on Unfair Conduct and Reporting Procedures

According to Article 39 (“Ban on Unfair Conduct”), procedures and methods for reporting unfair conduct by a software business to a purchaser are defined to correct unreasonable practices.

• Restrictions on Subcontracting of Software Business

The scope of subcontracting is changed from “more than 50% of the project budget” to “more than 50% of the purchase amount of goods (including commercial SW)” as the “project budget” was excluded.