[비즈한국] Park Tae-hoon, CEO of Watcha, has once again directly criticized LG Uplus032640 regarding its "U+tv Moa" service. He claims that this service, which provides content search features on mobile and web platforms, was created by unauthorized use of data from "Watcha Pedia," Watcha's content recommendation and rating platform. Since their acquisition negotiations fell through last year, Watcha and LG Uplus have been locked in a recurring battle over allegations of "data theft." While Watcha previously saw its complaints dismissed or closed by the Fair Trade Commission (FTC) and the Ministry of SMEs and Startups (MSS) respectively, this time it has filed a complaint with the Korean Intellectual Property Office (KIPO) alleging that LG Uplus violated the Unfair Competition Prevention Act. The conflict between the two companies shows no signs of ending.
Third filing with an agency; this time based on new service launch and data records
On the 12th of last month, Watcha reported LG Uplus to the Korean Intellectual Property Office for unauthorized use of data. This is its third response, following complaints filed with the FTC and the MSS in October and November of last year regarding alleged technology theft. While the FTC and the MSS each decided not to initiate a review or to close the case, Watcha believes this time is different. It asserts that the U+tv Moa service has now actually been launched, and they have secured evidence that this new service violated the scope of their established contract.
A Watcha official explained, "Under the data contract signed in January 2018, LG Uplus is restricted to using Watcha's data, including ratings and comment information, solely for U+ Mobile TV and IPTV services. This data was not applicable to new services, and the contract price was calculated based on those conditions, yet a clear data infringement has occurred."
U+tv Moa is an information-seeking community service that allows LG Uplus IPTV customers to check content information and leave ratings via a mobile app. It was released in February of this year after undergoing private testing late last year as a companion service to enhance VOD convenience. In broad terms, the concept is similar to Watcha Pedia, which has positioned itself as a movie rating and recommendation service since 2012. The fact that U+tv Moa did not exist, or was only in beta, when the FTC and MSS were reviewing the case is considered a reason why the Korean Intellectual Property Office might reach a different conclusion.
Watcha explains that traces of the data theft have been recorded. Watcha CEO Park Tae-hoon, himself a former developer, appeared as a witness at the National Assembly's Trade, Industry, Energy, SMEs and Startups Committee audit on the 25th, stating, "After confirming the launch of the U+tv Moa service, I accessed the website's developer mode and found evidence through the Application Programming Interface (API) logs that it was downloading Watcha data." The dispute, which many thought would end at the allegation stage, is being reignited by the new filing with the Korean Intellectual Property Office and its inclusion in the parliamentary audit.
In response, LG Uplus countered by saying, "We used Watcha's data only within the scope of our contract, and the features provided by Watcha are standard and commonly shared across the industry, making it difficult to classify them as unique trade secrets." They further argued that they have not violated any relevant laws and that previous investigations by the FTC and MSS found no issues related to the matter.
New phase following the unilateral termination of acquisition talks?
"Regarding the information requested by LG Uplus, our internal engineers were worried, noting that the requests were at the level of 'asking exactly how many personnel are needed to implement services like those of Watcha Pedia.' We were in a situation where we were waiting only for the holding company's approval, so we were trying to complete the investment regardless." (CEO Park's testimony at the National Assembly audit)
Watcha described the conflict with LG Uplus as an exceptional case. It claims that LG Uplus's requests for information were "excessive" and that Watcha was "desperate" enough to accommodate them. However, experts point out that the theft of trade secrets during investment or M&A processes is a recurring practice. Representative Song Jae-bong of the Trade, Industry, Energy, SMEs and Startups Committee noted, "Technology theft by large corporations against small and medium-sized enterprises is frequent, with 6,740 cases of consultations last year alone," adding, "Acts where companies demand technical information under the guise of investment and then release similar products are happening in many places."
A key issue in this case is the infringement of ideas where specific technical information was requested under the pretext of investment during the M&A process. Watcha believes that LG Uplus requested confidential data while expressing intent to invest, only to break off discussions after 10 months in May of last year and pivot to their own competing service.
The M&A was a desperate opportunity for Watcha, which was concerned about its very survival. Watcha had raised 49 billion won in convertible bonds (CB) at the end of 2021, receiving a corporate valuation of 300 billion won. While a valuation of 500 billion won was mentioned during pre-IPO efforts early the following year, the company's value plummeted after failing to attract further investment. Falling behind in the "war of money"—the competition for content investment—its operating loss in 2022 (55.5 billion won) more than doubled from the previous year (24.8 billion won), and its cash assets were depleted.
For Watcha, which started as a movie recommendation service in 2011 and launched its own OTT "Watcha Play" in 2016, the content recommendation algorithm carries special significance. It is a key feature that the company highlights as a major differentiator from other OTT platforms.
The Korean Intellectual Property Office is currently investigating the matter. A crucial point will be whether the office views this filing as the same issue as the previous FTC and MSS complaints, or as a separate matter involving breach of contract related to a new service. Jung Cha-ho, a professor at Sungkyunkwan University Law School, stated, "Even if other agencies have issued negative decisions such as dismissals, if the new issues and legal principles to be argued are different, a different judgment could be reached."