Patent Shield Becomes Sword Against Korean Chipmakers

In the mid-to-late 1990s, U.S. semiconductor company Intel dominated more than 90% of the global microprocessor market, wielding enormous influence. A saying circulated in the information technology industry: "When Intel sneezes, the global PC industry catches the flu." Yet even Intel could not escape attacks from Non-Practicing Entities (NPEs).

In 1998, Intel was embroiled in a patent lawsuit from a company called TechSearch. TechSearch acquired patents from bankrupt companies and demanded large settlements from tech giants like Intel. Peter Detkin, Intel's in-house counsel, called TechSearch a "patent troll"—a reference to the creature in Nordic folklore that hides under bridges and extorts tolls from passing goats. Ironically, Detkin went on to co-found Intellectual Ventures (IV), the world's largest NPE, in 2000.

A similar case has unfolded in Korea. The Seoul Central District Prosecutors' Office recently indicted and detained an NPE executive accused of conspiring with a former Samsung Electronics intellectual property center employee who leaked patent secrets. The employee was even found to have secretly established his own NPE while still working at Samsung. Previously, a former head of Samsung Electronics' IP center was convicted in a first-instance trial for allegedly founding another NPE after leaving the company and using it to attack Samsung. Patents—shields meant to protect corporate technology—have overnight become swords aimed at companies' hearts due to insider moral hazard.

NPEs have recently been aggressively targeting Korean semiconductor companies including Samsung Electronics and SK hynix, taking advantage of the U.S. government's strengthened patent protection policies. The indiscriminate attacks by NPEs extend beyond individual companies' financial losses from litigation costs and settlements. They affect funds that would otherwise be used for innovative R&D and ultimately inflict devastating damage on national high-tech industries' growth engines and the broader economy. Patent theft and illegal activities that shake the foundations of companies and the national economy must be met with stern and decisive responses that serve as examples to deter others.