Korean IT Firms Come Under Foreign Attack Over Patents

      July 12, 2011 07:32

      IBM registered the most patents in the U.S. last year with 5,896, and Samsung Electronics rose to No. 2 with 4,551 and LG Electronics ranked ninth with 1,490 patents. Judging by the number of registered patents, Korea is a major force, but the atmosphere is quite different on the frontlines, where Apple, Microsoft, Philips and other global IT companies have launched a patent war against their Korean rivals.

      They have started using patent and copyright law to protect their smartphone and LED technologies and to pressure Korean IT firms.

      ◆ Patent Wars

      The main battleground is the smartphone market. Apple owns the patent for the iOS operating system for smartphones. Microsoft is adapting its Windows operating system for smartphone use. Now Apple is suing Samsung for copying in its Galaxy phone the iPhone's touch-screen technology that increase or decreases the screen size, as well as over the menu layout and product design. Microsoft wants Samsung to pay US$10 per phone in royalties for using its patented technology. That amounts to W500 billion (US$1=W1,058) a year.

      Last year, Microsoft negotiated with Taiwanese smartphone maker HTC and extracted $5 per handset in royalty payments.

      The reason is the Android operating system used by Samsung and HTC and developed by Google. Apple and Microsoft claim Android uses a large portion of their own OS, and U.S. software developer Oracle claims Android illegally uses its own Java programs. But Google offers Android free of charge, so smartphone makers that use it have to deal with the legal consequences themselves. LG is also expected to face a lawsuit soon since its smartphones run on Android.

      U.S. companies virtually control the global market for operating systems, which determine the success or failure of a smartphone. Korean companies have plenty of patents for manufacturing technology, but very few for software. If they lose the lawsuits against U.S. players, they will have to pay hefty royalties to Apple, Microsoft, Oracle and other companies.

      ◆ Lack of Creativity

      The field of LED lighting is another battlefield. LEDs are more energy efficient than conventional light bulbs and are being praised as the next generation of lighting sources. Leading European lighting equipment makers Osram and Philips say Samsung, LG and Seoul Semiconductor infringed on their patents and have filed lawsuits against the Korean companies. Hong Won-jin, head of Troy Intellectual Property, said, "Major foreign IT companies have intensified their offensive after Korean rivals who benchmarked them began to post increasing revenues."

      Samsung LED, which was established last year, has grown into the No. 2 manufacturer in the world after Japan's Nichia. LG Innotek, another Korean LED maker, ranks sixth. Once they began to see their market shares slip, European manufacturers began to attack latecomer rivals using their patented technologies.

      If there is a golden rule companies seem to adhere to in patent lawsuits is to target successful rivals. This means Korean IT firms, which have seen massive profits in recent years, have become the main targets. According to the Korean Intellectual Property Office, there were 611 patent lawsuits filed between foreign and domestic companies from 2004 until March of this year. Some 75.3 percent or 460 cases were filed by foreign companies against Korean ones, and only 24.7 percent or 151 by Korean companies against their foreign rivals.

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