SMALL KOREAN COMPANIES STRUGGLE THROUGH THE PATENT THICKET

Korea's JoonAng Daily reports that small and medium-sized mobile phone makers in Korea face huge royalties for using technologies related to the Global System for Mobile communication, or GSM, standard. The Ministry of Information and Technology confirmed yesterday that foreign mobile phone firms are demanding that these small companies pay for using core technology patents for GSM, which is the standard for mobile service in Europe. There are about 400 core technology patents for GSM, held mainly by cellular makers such as Nokia, Motorola and Ericsson, according to the Information Ministry, but there are about 4,000 technologies that have the potential of becoming patentable.

In Korea, Samsung Electronics is the only company that has GSM technology-related patents; it used its six patents to settle negotiations through cross-licensing. Other large phone makers such as LG Electronics, Pantech and Curitel also make GSM phones, but royalties are less of a problem since the companies have managed to keep them to under 10% of the handset price. Small firms, however, are being threatened since their orders are on a small scale. Also, many companies have only recently started making GSM phones since competition for code division multiple access, or CDMA, standard phones has become too high, mainly due to cheap phones originating from China.

GSM phones: posing big questions for the survival of small businesses

Last year several companies holding patents individually sought out small mobile phone makers, demanding royalties of $4 million to $40 million. The companies are still undergoing negotiations.Major cell phone makers are not as threatened but are also worried that patent holders will increase royalties.Responding to the plight of small cell phone makers, the Information Ministry and Institute of Information Technology Assessment plan to help them out by creating a patent map of GSM core technologies by March and developing a strategy to protect those companies.

The IPKat has every sympathy for small companies that have to tiptoe through the patent thicket if they want to manufacture without threat of legal action. Never mind the cost of paying patent licences, the cost of even finding out if you have to pay them can be quite high enough.

What is GSM technology? A good overview here
More core technology here