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Patent Competition of the World

In 2016, the number of patent applications in China reached 1.34 million, exceeding the total number of patent applications filed by Korea, the US, and Japan combined, which was 1.13 million. Money is lost or made due to patents. What make patents important, why are other countries filing increasingly more patents, and does our country remain competitive?

Patenting is an administrative or statutory administrative act that establishes a certain legal right or ability and a comprehensive legal relationship with a specific person. The patent act provides for the exclusive use of inventions that meet the requirements of this act, which were established to promote the development of technology by protecting, encouraging and exploiting the invention and contributing to industrial development.

So, why is a patent important? Because patents are directly related to the right to sell and thus any financial profits that may be made. First, regarding the right to sell, since patents registered in Korea are not effective in foreign countries, it is necessary to register foreign patents in foreign countries. Patents follow the territorial principle, which can exercise the state's legislative, judicial, and enforcement jurisdiction only within its territory. Therefore, even if it is patented in Korea, it is not possible to claim any rights if another company produces and sells products in a foreign country with the same technology, unless patented in that country. For example, a domestic company that develops and sells smartphone gloves has entered China by selling products to a Chinese Internet shopping mall. Their products have gained popularity in China and tried to achieve great success. But they have not acquired patents and utility models in China, and the company has been warned by 3 Chinese companies that they will no longer be able to sell goods at Chinese online shopping malls. These Chinese companies copied the same product and received a utility model patent and therefore they could attack Korean companies.

 Second, it affects companies’ finances. In cases where patents have been infringed, large financial settlements may result. A well-known case is Apple’s lawsuit against Samsung, in which Samsung were required to pay 1.3 trillion won to Apple. In another high-profile case, Nintendo, in September of this year, were required to compensate 11.3 billion won for infringing on six patents belonging to US iLife Technologies. As you can see in these cases, patents are vitally important in the operation of many businesses.

 Then what about other countries? Are they dealing with patenting effectively? Recently, as the importance of patents has become more significant, countries are investing to develop and register new patents while encouraging patent applications. This trend is reflected in the direct investment in R & D (Research and Development) activities. As can be seen with the world’s most economically powerful countries, China and the United States, there is also a trend to use patents to protect national industries.

First, let’s consider China. They are making a lot of investment in patent applications and have become the country with the highest number of pending patents, surpassing Japan in 2010 and the USA in 2011. And while the number of global patent applications increased by an annual average of 7.6% over five years, China’s increased by 20.3%. As of 2016, it increased by a further 21.4% from the previous year. This rapid increase in patent applications in China is due to aggressive R & D investment by the Chinese government and enterprises. In 2016, China's total R & D investment amounted to 1.444 trillion yuan (260 trillion won), which accounts for 2.1% of GDP. China has a tendency to make favorable judgments in their patent disputes. In the past three years, 82.2% of Chinese plaintiffs and 76.9% of foreign plaintiffs have won patent infringements. As a representative example, Samsung Electronics lost its patent dispute with Huawei in China. As a result of a patent infringement lawsuit filed by Huawei in June 2016 against Samsung Electronics, the court ordered Samsung Electronics to pay 14 billion won. In August, a Chinese state-owned company also claimed 400 million yuan (690 billion won) against Samsung Electronics. Moreover, the Chinese government is pressuring foreign companies with their market power and demanding that foreign companies in China cooperate with Chinese enterprises or establish a center, while taking compulsory technology transfer strategies such as registering patents to China first. It is putting pressure on foreign companies with its market power. In addition, as their patents increase, it is likely to increase patent disputes with Korea and other countries.

In considering the United States, like China, it is a country that is is trying to keep the world under its domination based on its domestic market, national power, and huge power of their intellectual property rights. Since 2010, they have been giving importance to the patents related to the 4th industry (next generation industrial revolution resulting from the convergence of information and communication technologies), and the patent applications in the 6 fields related to the 4th industrial revolution are 13,700. They are also belligerent in disputes with foreign companies. Korean companies that entered the US from 2012 to this July filed a total of 1304 patent infringement cases against US companies. On the other hand, only 66 cases of domestic companies filed against US companies. It is thought that this is because of the concentration of attacks of competitors in the United States to contain the field of mobile phones, household appliances, automobiles and semiconductors, which are Korea 's main industries. In addition, the recent US protection of the domestic industry has been strengthened, and patent disputes against Korean companies are expected to increase further.

Lastly, in looking at Japan, it is also showing a tendency to move with interest in patent applications according to world trends. They have invested heavily in semiconductors, automobiles, and stem cell technology, and have either followed or surpassed the fields that were strong in Korea. From 2006 to 2015, semiconductor patent applications in Japan amounted to 18,725. During the same period, the number of automobile-related patent applications was 20,605. Korea has fewer patents than them. This trend also applies to the life sciences. In the case of stem cell technology, it is expected to have a value of 10 trillion won by 2020. Induced pluripotent stem cell (iPS cells, a next generation stem cell that can be used to regenerate all body parts by converting somatic cells into stem cells) technology was pioneered by Professor Yamakana Shinya of Kyoto University, and resulted in him being awarded the Nobel Prize in Physiology or Medicine in 2012. Since then, the Japanese government has given intensive support to this area, and so currently Japan holds 37 patents in iPSC technology, while Korea holds only 6 patents.

 

As we can see above, many countries are concentrating on investing in and protecting their patents. What about our country? Korea is also investing a lot, but overall efficiency is not that good. According to the National Research Council of Science & Technology (NST), the research productivity (R & D cost of technology imports) from the transfer of successful projects is only 3%. The government invested in an R & D budget of 4.57 trillion won in 2015. However, the royalty income was only 1334 billion won. The reason for this is that patents and R & D-related support are not decided after proper review, only short-term tasks are selected. So, even though the success rate of the task is high, there is almost no research that can be commercialized. For example, considering that Apple has invested 6 trillion won in research on autonomous vehicles for three years, while Korea invested 2.1 trillion won in 3726 different projects in 2015, it has been arithmetically assigned to one short-term project. Only $500 million worth of research funding is used. In other words, companies are more likely to reside in a stable domestic market than to boldly challenge new technologies. The iPS cell industry mentioned in the case of Japan is the same situation. Japan has 37 patents, while Korea has only 6 patents.

 If so, what are the problems with patents? Let's look at it in terms of recognition and system. First, regarding recognition, we have emphasized that intellectual property is important, but, that unfair treatment can occur. There is a growing perception among larger corporations that they can get away with copying or ‘damaging’ others, particularly while courts make lightweight judgments which fail to protect patent holders. As a result, even if a patent suit is filed, the probability of winning the case is low and even in the event of winning remuneration is often low. The rate of successful patent litigation is only 50%, while compensation amounts are generally only 20 to 30 million won, with small and medium-sized enterprises (SMEs) are often being defeated by larger companies. The loss rate for SMEs in the last three years has reached 80%. Moreover, if the lawsuit goes to the Supreme Court, the cost of the litigation is often equal to or more than the compensation. Thus, there is increasing disbelief and skepticism surrounding the value of patent applications.

 The second main issue concerns the system for registering a patent. A patent is valid for 20 years, and an annual registration fee (amount paid every year after patent application) must be paid, which is often burdensome for small or medium-sized companies or individuals (total amount of 8.3 million won to be paid for 20 years for each patent). Public patent attorneys often have a workload of 1651 hour per year, which makes it difficult to support the intellectual rights of individuals or SMEs. In the case of large corporations, the protection system is also insufficient. Over the past five years, Korean companies received 1304 lawsuits filed by US companies, of which 87% were lawsuits against large corporations with flagship industries. However, only small and medium-sized enterprises are eligible to receive legal aid, including support for judging and litigation expenses, litigation insurance support, customized standard patent strategy support, and intellectual property dispute response consulting.

The situation in our country is that many companies try hard but fail to win patent disputes, and even if they win, they cannot receive fair compensation. Therefore, greater government efforts are essential. Some efforts to resolve the problems surrounding patenting issues are being made. The Korean Intellectual Property Office (KIPO) announced on November 1 of this year that they will shorten the patent application period for the 4th industry from next year, with the process taking a maximum of 6 months as opposed to 10 months. In addition, patent registration fee reductions and exemptions have been extended to SMEs and venture companies. Currently, the KIPO offers reductions on the patent registration fee by 30% from years 4 to 9 after the initial patent registration, but the reduction amount will be 50% from next year and will run until the 20th year of the patent. Plus, to improve patent disputes, the government will introduce a punitive damages system for malicious patent infringement and business secret infringement from next year, and will expand the types of infringement of trade secrets that are punishable.

 Companies also need to make greater efforts. In the case of SMEs, it is necessary to steadily shift the perception that patents are not worth applying for and that the infringement of others’ patents is acceptable. It is important to raise awareness that registering and maintaining domestic and foreign patents through relevant government agencies is an essential for protecting a a company’s strategic development and profits.

 The Inha Times(IT) interviewed Sungbo Yang (Yang), a patent attorney in P&T Intellectual Property Law Firm, for further information.

IT: As there are several cases that Korean companies lose their lawsuits against foreign companies, what may be some ways to protect them?

Yang: Considering the increasingly fierce competition for preemptive patent technology related to the 4th Industrial Revolution, it is desirable to change the examining criteria of the Korean Intellectual Property Office. Therefore, domestic companies can participate in fair as they will be able to secure the rights of the patents through the quick self-examination. Also, we can expect they will be able to protect their own technology and extend extent of their business smoothly. In addition, as the patent registration fees for SMEs and venture companies has reduced, the cost-cutting effect will increase for those companies. Moreover, these savings can be used for investments in R & D which will eventually help national industries to develop.

IT: Do you think the announcements released by KIPO will help SMEs to win the litigation for their patents?

Yang: According to the improvements announced by the KIPO, SMEs will be able to increase their cost savings. Therefore, the budget will be not only used for retaining existing patents but also can be used for investments for new patents. Therefore, it is expected that it will help strengthen SMEs power for their patent business. 

In addition, KIPO is currently conducting various projects to support SMEs' patent strategy and IP design through their affiliated public institutions. Through these kinds of project, SMEs can get help from various experts to avoid overlapping with existing patents. Also, they can help build strategies for developing new patents in areas which patents are not concentrated.

IT: Can you give advice to Inha university students that are planning to register a new patent or preparing a start-up business?

Yang: Although we cannot say that patents can provide 100% complete protection of the technology, patents are the most fundamental only way for small companies to protect their technology. Therefore, if you are preparing a business, I strongly recommend you look for the right criteria of the patent and register it right away to protect your rights. Currently, various municipalities and KIPO are proceeding several projects to support various start-up companies. Therefore, it would be good for students to look for information in advance and apply it in order to save their money.

 

While it is important to develop new technologies, it is more important to protect the ones that we have already created. Until now, we have not been prepared for this. So now, we should try to improve these perceptions and protect our rights.

이상민  0530ldsm@naver.com

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