LG has as much to gain from its open innovation drive as Korea’s SMEs 13 Feb 15
LG Group – one of South Korea’s largest chaebol (conglomerates) and parent of companies including LG Electronics, LG Chem and LG Display, among others – announced last week that it would ‘open up’ part of its patent portfolio for use by third parties. The move follows similar widely publicised actions taken by Tesla Motors and Toyota in recent months.
According to the Korea Times, LG companies will share 29,000 patents primarily with SMEs in the biotechnology, energy and cosmetics industries – though it is not clear precisely what ‘share’ means in this context. Furthermore, 3,058 patents will be made “freely available” to venture capital (VC) firms and their portfolio companies.
LG will also station some of its IP experts at the newly opened Chungbuk Creative Economy Innovation Center in Cheongju to assist companies and investors to leverage the patents in question, develop new business models and create product and service lines.
JuSeong Ryu, senior manager in the Intellectual Property Center at LG Electronics, told IAM that in addition to the three key markets mentioned above, the programme is aimed at SMEs and VC firms across all industries which might have uses for the technologies the patents relate to. “The technology areas covered include not only energy, beauty and bio, but also electronics, display, chemicals and others,” he said. “In terms of jurisdictional coverage, there are Korean and US patents, as well as German and French assets and issued patents from other countries too.”
The smaller set of 3,000-plus patents that are ‘freely available’ will be licensed on a royalty-free basis, Ryu told me. “LG wants to build up the Korean SME ecosystem through use of our patents,” he added. “We believe that by opening up our patents we can help SMEs to build new businesses and engage in R&D.”
Tesla Motors also ‘opened’ up its portfolio back in June when it made a commitment not to sue third parties that practiced on its patents; while last month, Toyota offered to license almost 6,000 of its patents relating to fuel cell vehicle technology royalty free. In both cases, these actions were aimed in part at accelerating R&D in the wider automotive industry by granting other businesses access to the two companies’ technologies, with the hope that this will create more mature markets for their own products in the future. The announcement of these programmes also provided the two companies with a fair amount of publicity.
To an extent, the same can be said of LG’s decision. However, there is also a particularly Korean context to be aware of here. This is not the first open innovation programme of its sort in the country. LG itself has previously transferred or licensed patents for free or at a cut price to domestic SMEs. Moreover, other major chaebol have also launched research centres and incubators in the country coupled with access to parts of their patent portfolios; back in November, for example, SK Group revealed its plans to expand its collaborative efforts nationwide after opening innovation centres in Daejeon and Sejong.
South Korea’s national ledger runs a substantial deficit when it comes to IP, with its balance of payments for ‘use of intellectual property’ standing at -US$52.2 billion for 2014. This is despite the fact that it spends more on R&D than any other country. It would seem that a large part of this is down to a status quo where Korea’s largest companies invest huge sums in filing massive numbers of patents, acquiring them from third parties and licensing them in, but are relatively inactive when it comes to monetising their homegrown IP assets. Samsung Electronics alone spent over US$898 million on licence fees between January and September last year. South Korea’s politicians have recognised this, and boosting innovation in the country’s start-up ecosystem is seen as a key part of the solution.
The chaebol that have dominated the Korean marketplace for decades clearly have a major role to play in this regard; and they themselves have much to gain by engaging in open innovation with SMEs. The smaller companies gain cut-price access to intellectual property they can utilise to grow their businesses. The conglomerates get to put some of the non-core patents that are languishing in their sizeable portfolios – and are costing them money to maintain – to good use. At the same time, they get a sneak-peak at potential acquisition targets for the future. Anything that promotes growth – while reducing the country’s IP deficit – can only be positive for Korea.
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