Patent licensing and sales key to addressing Korea’s negative IP balance of payments

Towards the end of August, South Korea’s central bank released its IP balance of payments figures for the first quarter of the fiscal year. For a country that has grown used to running at a considerable deficit when it comes to payments for use of IP assets, the latest data was – at a glance, at least – positive.

Since the Bank of Korea began its records in 2010, South Korean businesses have paid out substantially more to license-in and buy intellectual property from their foreign counterparts than they have made in licensing out or selling their own. This is in spite of the country’s huge per capita rate of patent filing and ownership, and its impressive investment in R&D; as recently as 2012, the equivalent of 4.6% of the country’s GDP was spent on R&D, while Korea also came in top over other countries in terms of the rate of R&D spending as a proportion of total revenue, at 3.4%. Moreover, in 2014 the Asia Development Bank ranked the country in second place behind neighbouring Japan in terms of its effectiveness at transforming creative inputs into outputs such as patents per capita, published scientific papers and export sophistication. Nevertheless, in 2014, Korea’s IP royalties deficit stood at $6.2 billion, with around three-quarters of that accounted for by the electrical and electronics industries.

In 2016 Q1, the national IP deficit between January and March was a comparatively trifling $780 million. On the face of it, that would seem like a vast improvement; and might suggest that Korean companies and research institutions have, across the board, become considerably more adept at monetising their intellectual property. But the numbers alone don’t tell the whole story.

While smaller and medium-sized Korean businesses recorded a $630 million surplus over the three-month period, the country’s large corporates – centred on the electrical and electronics sectors and holding by far the largest patent portfolios – continued to post a negative balance of payments in relation to the United States. That said, this particular shortfall was nevertheless halved from $2.44 billion in 2015 Q1 to $1.03 billion in 2016 Q1, with payments for licensing-in electrical and electronics-related IP from US rights holders decreasing by around $330 million year-on-year.

However, it should be noted that Korea’s receipts for selling and licensing its own electrical and electronics-related intellectual property also decreased, from $1.07 billion to $940 million. Its IP royalties surpluses with China and Vietnam are most likely explained by licensing to local subsidiaries and joint ventures, rather than success at licensing or selling patents to third parties.

All in all, Korean patent owners still have plenty of work to do if they are to create longstanding added value from monetising their IP assets. The advent of online platforms like IAM Market means that it is now easier than ever to link up with potential buyers, licensees and collaborators in order to exploit patents; while intermediaries such as Korea’s own Intellectual Discovery can work with operating companies to do the leg work of patent monetisation. It is up to Korea’s IP owners to explore these options in an effort to turn the deficit around.

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