[Valuable Intellectual Property] Patent Troll Attacks During Recession... CEOs, Prepare Yourselves

⑮Kim Yong-seon, President of Korea Intellectual Property Protection Agency
Overseas NPEs Also Target Small and Venture Companies
"Threatening Company Survival... Patent Dispute Prevention Needed"

Kim Yong-seon, President of the Korea Intellectual Property Protection Agency, is giving an interview to Asia Economy at the headquarters in Yeoksam-dong, Seoul.
Photo by Heo Young-han younghan@

"In the past, the primary targets of 'patent trolls' were large corporations like Samsung and LG, but now they are attacking small and venture companies as well. As advanced technology is integrated into automobiles, not only IT companies but also Hyundai and Kia are being threatened."

Kim Yong-seon, Director of the Korea Intellectual Property Protection Agency, stated this in an interview at the agency's headquarters in Yeoksam-dong, Seoul. He diagnosed that overseas patent litigation specialists known as Non-Practicing Entities (NPEs), often called patent trolls, are expanding their attacks on Korean companies. Having served over 30 years at the Korean Intellectual Property Office, rising to the position of deputy director, Kim conducted his first media interview with Asia Economy on the 100th day since his appointment as director of the Korea Intellectual Property Protection Agency.

Director Kim expressed concern, saying, "With the ongoing COVID-19 pandemic and economic downturn, attacks by global NPEs have recently increased." NPEs are companies that do not engage in technology development or manufacturing but generate revenue through lawsuits or licensing agreements by purchasing patents from companies. The number of lawsuits filed by NPEs against Korean companies in the U.S. was 90 in 2019, 111 in 2020, and 149 in 2021.

Kim explained, "As the economic situation worsened, manufacturers sought to monetize their patents by transferring them to NPEs, and investors flocked to NPE funding, resulting in an increase in lawsuits." This is similar to the 2008 financial crisis when many U.S. manufacturing companies rushed to monetize patents, leading to a rise in NPE lawsuits.

Samsung Electronics, which has hundreds of intellectual property (IP) specialists, has paid billions of won to NPEs over time, and there are still many NPEs lined up to attack with patents.

If LG Electronics, which has exited the mobile business, sells its estimated 20,000 related patents to NPEs, smartphone manufacturers including Samsung would face difficulties. In this context, LG earned about 800 billion won in patent revenue from Apple in the first quarter of last year. The patents covered by the licensing agreement between the two companies are 'standard patents.' Apple paid LG 800 billion won in exchange for using LG's standard patents. As LG exited the mobile business, the patent fees it had to pay Apple disappeared, causing its patent revenue to jump significantly.

There were also behind-the-scenes discussions about LG transferring its patents to Samsung, but it is known that no agreement was reached due to conditions such as price.

Kim Yong-seon, President of the Korea Intellectual Property Protection Agency / Photo by Younghan Heo younghan@

Director Kim said, "It seems unlikely that LG will sell all its core patents because they may be used in the automotive electronics industry and other sectors," adding, "The government is also concerned that LG's patents entering the market could backfire and is preparing countermeasures."

The problem is that small and venture companies lacking specialized personnel, experience, and funds are becoming targets. Companies planning to expand overseas could become prey to NPEs if they do not establish proper patent strategies. In fact, the NPE 'Ceder Lane Technologies' filed lawsuits against seven Korean small and medium-sized enterprises in the U.S. last year, citing patents related to imaging processing technology applied to video devices.

Kim stated, "The cost of first-instance litigation in the U.S. usually ranges from 1.1 billion to 6.9 billion won, with median damages amounting to 660 million won, which is enormous," and added, "If one day a small business owner receives an order to appear at the U.S. District Court for the Eastern District of Texas, it would be a complete shock." The Eastern District of Texas is known for rulings favorable to patent holders and is preferred by NPEs.

Patent disputes threaten the very existence of companies. In 2014, when Japan's Canon won a patent lawsuit against a domestic laser printer parts manufacturer, about 300 Korean small businesses either went bankrupt or relocated to China, suffering fatal damage. While NPE activities were previously concentrated in electronics and IT fields such as smartphones and semiconductors, they are now moving into the automotive industry. Kim said, "As production of electric vehicles and autonomous vehicles incorporating wireless communication technology increases, Hyundai and Kia are also being threatened," adding, "NPEs watch profitable industries and launch attacks once the market matures."

To respond to the global patent war, securing core and standard patents in national strategic technologies such as artificial intelligence (AI), semiconductors, and secondary batteries is urgent. Kim emphasized, "From the R&D stage, it is necessary to target core and standard patents and adopt strategies to avoid patents held by competitors or exploit gaps." He particularly noted that for small and venture companies, patents are 'David's stones that can defeat Goliath.' Kim urged, "Patents are the core of management that determines a company's future. I hope companies secure smart patents to prevent potential patent disputes."