[‘Patent Judgment Emergency’ K-Semiconductor]⑤ Patent Guarantees Targeting SoBuJang Companies... "When Super-Eul Files Lawsuits, Manufacturers Turn a Blind Eye"

Overseas Equipment Companies' Influence Absolute
Government Support Needed for Patent Dispute Preparedness

Material, parts, and equipment companies, which are important partners in the domestic semiconductor industry, bear patent guarantees when supplying to major semiconductor manufacturers. In the event of a patent lawsuit, manufacturers suspend deliveries and require a written confirmation that they are not responsible for the patents. Even if the material and parts companies win in court, they cannot resume supplying materials or parts. There are criticisms that patent guarantees work disadvantageously only for material, parts, and equipment companies.

CEO A of a semiconductor material and parts company recently told Asia Economy, "When signing supply contracts with major semiconductor makers, we go through a patent guarantee procedure that includes a clause stating that transactions will be suspended if issues arise regarding intellectual property rights such as patents," adding, "If a problem occurs, all responsibility is attributed to the supplier." He continued, "If overseas equipment companies file patent lawsuits or send patent infringement warning letters, major small and medium enterprises continue to fight, but smaller companies like ours have no choice but to say 'we will no longer sell'." This is because they lack personnel to respond and the cost of litigation is enormous, threatening the very existence of their business.

Another CEO B of a material and parts company said, "Large equipment companies like Applied Materials, Lam Research, and ASML cannot sue foundry companies, their customers, out of business ethics, but they target the material and parts companies that supplied those parts," adding, "Most technologies are protected by patents, so it is not easy for domestic material and parts companies, which are latecomers, to overcome them." Small and medium material and parts companies have no choice but to be cautious about when and how they might face patent attacks if the products they supply receive a good response from manufacturers.

CEO B said, "Simply copying existing technology is obviously wrong," but "if truly new technology or better parts have been developed, the story changes."

There are also practical reasons why manufacturers find it difficult to adopt better parts. Overseas equipment companies with unique technological capabilities exert absolute influence as 'super Eul (乙)' in the semiconductor industry. Large semiconductor manufacturers like Samsung Electronics find it difficult to introduce cutting-edge technology without close relationships with equipment companies. CEO B said, "It is not easy even for Samsung Electronics or TSMC," adding, "Even if they try to apply new products, overseas equipment companies firmly resist."

CEO A also said, "Even if we present carefully developed parts, overseas equipment companies often reject them citing issues such as electrical signal or software compatibility," adding, "Due to the nature of the semiconductor industry, I cannot specify companies, but such cases frequently occur around our company." He added, "Overseas equipment companies tend to stick to existing parts, so technical proposals are not easily accepted." Ultimately, domestic material and parts companies have to watch both major manufacturers and the 'super Eul' overseas equipment companies. This is why material and parts companies inevitably remain vulnerable like shrimp caught in a whale fight.

Material and parts companies compare cooperation methods between Taiwan's TSMC and Samsung Electronics. CEO A said, "TSMC collaborates with small and medium enterprises from the early stages of contracts with overseas equipment companies to create opportunities to develop better parts," adding, "Generally, overseas equipment companies are reluctant to use parts from other companies, but TSMC takes risks and tries to apply better products." CEO B, whose company counts TSMC as a client, said, "TSMC conducts upgrades secretly, sometimes without even the equipment companies knowing," adding, "It means that if the upgrade is not about taking away existing parts but improving in a better direction, it is acceptable."

Domestic material and parts companies are also at a disadvantage in the legal environment. Even rumors of being involved in lawsuits can cause internal unrest, so there is a strong atmosphere of secrecy. A patent attorney who requested anonymity said, "There are quite a few cases where summonses are sent directly to the CEO rather than the company."

Many disputes are conducted confidentially, so companies must respond to lawsuits without sufficient information. Legal defense is inevitably limited. The confidential lawsuit structure poses a significant limitation for material and parts companies in sharing patent dispute information or preparing strategic responses.

Jongwoong Baek, CEO patent attorney of Intro Patent Law Office, said, "In the U.S., anyone can access lawsuit information and there is an active database for lawsuit-related data, making it easy to obtain information, but in Korea, only parties involved in the case can view rulings," adding, "There are far more ongoing disputes than those reported in the news, and many are resolved confidentially through negotiations, making it difficult for material and parts companies to obtain information."

Experts advise that to avoid becoming prey in patent disputes under the influence of overseas equipment companies, it is important for domestic material and parts companies to prevent lawsuits before they occur. Patent attorney Baek said, "An environment should be established where companies can clearly declare that there are no patent issues when launching self-developed parts, but our material and parts companies still lack awareness about patents," adding, "The Freedom to Operate (FTO) procedure, which examines patents with competitive characteristics at the stages of product conception, product concretization, and product completion, should be strengthened." He also pointed out that government support such as strengthening patent examination is essential since small and medium enterprises find it difficult to prepare countermeasures on their own.

There are also calls to create an environment where domestic material and parts companies can cooperate stably with large corporations to broaden the scope of technology adoption. CEO A said, "A channel is needed to discuss technical exchanges and improvements," adding, "Currently, such channels are limited, but I hope a structure will be established where partners proactively propose ideas and solve problems."