"Intensifying Cross-Border Patent Competition... Need to Resolve Korea's Concentration Issue in Specific Fields"

Korea Economic Research Institute under Hankyung Association
Report on Patent Application Trends and Technology Preemption Strategies

The number of domestic patent applications filed by foreign companies is increasing, intensifying cross-border patent competition in advanced industries. However, patent applications by Korean companies are concentrated in specific fields such as semiconductors, secondary batteries, and digital communications, leading to calls for effective government support for strategic industries and the establishment of a technology transaction ecosystem.

On the 6th, the Korea Economic Research Institute (KERI), under the Korea Economic Association, revealed in its report titled "Patent Application Trends and Technology Preemption Strategies" that foreign companies are seeking to secure patents in Korea to gain a foothold in advanced markets. Last year, the number of domestic patent applications by Koreans was 183,748, down from 186,245 in 2021. In contrast, foreign patent applications increased from 51,753 in 2021 to 53,885 in 2022.

Last year, foreign patent applications filed in Korea accounted for approximately 22.7% of the total domestic patent applications of 238,000. By country, the United States led with 17,678 applications (35%), followed by Japan (13,860 applications, 27%), Europe (12,936 applications, 25%), and China (6,320 applications, 12%). Even when expanding the period to the past five years, the average annual growth rate of domestic patent applications by Koreans was only 3.1%, whereas the United States and China recorded 8% and 19.1%, respectively.

The report analyzed that since Korean companies hold many patents in semiconductors and battery sectors, foreign companies also intend to secure patents in Korea to preempt the global market in advanced fields.

Although cross-border patent application competition in advanced industries is intensifying, domestic patents are heavily concentrated in specific fields centered on export-driven industries.

The report pointed out that while domestic companies possess world-class technology in semiconductors, secondary batteries, and digital communications, they lack foundational technologies for global competition in other fields, placing them in a follower position. It added, "According to the patent application trends announced by the Korean Intellectual Property Office for the first half of this year, patent applications are concentrated in specific fields such as electrical machinery and secondary battery manufacturing with 5,581 applications, semiconductors with 4,406 applications, and digital communications and information transmission with 3,651 applications."

To resolve the issue of patent application concentration in specific fields, it advised selecting various new industry technology sectors as national strategic technologies and supporting research and development. By discovering and nurturing promising technologies centered on national strategic technologies, an environment should be created where domestic companies can preempt advanced technologies and secure future growth engines.

It also stated that a core strategy for technology preemption is to register advanced technologies acquired through research and development (R&D) as patents to secure exclusive rights. It explained that acquiring standard patents, like Qualcomm, makes it impossible to manufacture, sell, or provide services for related products without using the patented technology, enabling high profits and improving the national technology trade balance.

It advised actively introducing external technologies through technology transactions to preempt core technologies. It emphasized the need to prepare various technology transaction methods preferred by companies, such as mergers and acquisitions (M&A), investment-linked technology transactions, and running royalties (a post-payment method with low initial burden during technology transfer). Additionally, it added that to activate technology transactions among domestic companies, private intermediary organizations should be fostered and the efficiency of technology transaction intermediaries improved.

Lee Gyu-seok, a senior researcher at KERI, said, “Domestic corporate mergers still maintain the framework from when the system was introduced, making it difficult to effectively respond to M&A reviews and not aligning with global standards. We need to move away from government policies focused on regulation and establish policies that can create a technology transaction ecosystem.”

This content was produced with the assistance of AI translation services.