Patents emerging as new source of revenue
Date: October 06, 2007
kois.go.kr
Researcher at Genematrix Co.,A biotechnology company based in Gyeonggi Province has no need to produce anything to survive. Genematrix instead earns revenue through royalties from its technologies.
Its royalty earnings skyrocketed from 58 million won in 2003 to 360 million won in 2004. The figure rose further to 860 million won in 2005 and one billion won in 2006. The company reaped 760 million won from home and abroad in June this year, and expects revenues to reach 1.6 billion won by year's end.
Genematrix started out as a research center under the Cancer Research Institute of Seoul National University. The company earns 90 percent of its revenue through patents for its technology to treat hepatitis B and C viruses as well as gene analysis. Genematrix is a typical tech-based venture firm as 14 of its 18 workers are researchers.
The company's thesis ¡°The Population Genotyping of the Hepatitis C Virus¡± made the cover of the July 2006 edition of the prestigious magazine Clinical Chemistry. A company source says this was possible because Genematrix has secured its own core technology.
Another notable example is the Electronics and Telecommunications Research Institute (ETRI), a state-funded non-profit think tank. It jointly developed commercial CDMA technology with Qualcomm of the United States, and earns royalties for its patent technology under a 1992 contract. Qualcomm is barred by the contract from disclosing its annual royalty revenue, but the institute earned 51.1 billion won in 2006 and 43.9 billion won in 2005. The institute has earned a cumulative 459.5 billion won in royalties.
From royalty payer to royalty earner
Korea is gradually changing from a royalty payer to royalty earner, selling more of its patented technology abroad. This is the result of further investment in research and development and the entrance of more venture companies in information technology and biotechnology.
Korea's payments for foreign patents have stayed about the same for the past few years, as more domestic companies earn royalties from homegrown technologies such as Wibro and DMB, which have been adopted as international standards.
Another Korean venture firm, Digital Biotech, sold its technology of producing alternative substances for painkillers in 2006 to the German pharmaceutical company Gruenenthal for 48 billion won (37 million euros). In April this year, Digital Biotech sold another pain treatment technology for 11.6 billion won (nine million euros).
The key technology for simple image solution (SIS), the world's most widely used transmission solution for graphic and video images, is owned by the Korean company Neomtel. The firm earned 3.25 billion won in royalties from Qualcomm, comprising 31.4 percent of Neomtel's combined revenues of 10.22 billion won. SIS allows optimized images and seamless video through mobile phones. Korean telecom giants SK Telecom, KTF and LG Telecom adopted the technology in 2000 for standard graphics. Qualcomm followed suit in February 2001.
Korea's royalty revenues have jumped ten times over the past decade. In contrast, the country's royalty payments to foreign companies remained still for three years straight and even decreased last year.
Domestic companies earned more than $2 billion in royalty payments last year, or nearly half of their revenue earned abroad of $4.49 million. If this keeps up, Korea could go from the red to the black in royalty trade within five years.
Royalty earnings triple in six years
Back in the 1990s, Korea's royalty earnings did not equal even a tenth of what the country paid to other nations. In 2000, royalty revenues reached just $690 million, but the figure shot up to more than $2 billion six years afterwards.
Korea's royalty payments abroad surged from $3.22 billion in 2000 to $3.05 billion in 2001. The figure dipped to $3 billion in 2002, and then went up again to $3.57 billion in 2003 and $4.45 billion in 2004. Growth of the payments then began to wane, reaching $4.46 billion in 2005 and $4.49 billion in 2006.
In contrast, Korea's royalty earnings reached $920 million in 2001. The figure dropped to $840 million in 2002, but rebounded to $1.31 billion in 2003, $1.86 billion in 2004, $1.91 billion in 2005 and $2.01 billion in 2006. The upward trend is expected to continue.
In royalty trade, Korea suffered a deficit of $2.53 billion in 2000. The amount fell to $2.1 billion between 2001 and 2002, and then steadily rose to $2.26 billion in 2003, $2.58 billion in 2004 and $2.65 billion in 2005. Last year, however, the deficit dropped to $2.48 billion.
Royalty revenues rise 31%, expenditures 10%
The Bank of Korea says royalty income between January and July this year was $1.27 billion, up 31.5 percent from the same period last year. Outgoing expenses reached $2.78 billion, up 10.7 percent year-on-year.
The royalty trade deficit from January to July this year hit $1.54 billion, similar to last year's figure over the same period. Given the steady rise in earnings from domestic patents, however, the deficit is expected to be lower than last year's by the end of December.
Core technology led by gov't, commercialization by business
The new boom in patents and royalties is mostly due to efforts by the government and private business. Both sides have made consistent investment toward research and development to compete in the growth-oriented industry and lead the information age of the 21st century.
State investment in research and development rose 10.6 percent a year from 2003-2007. The efforts paid off, as Korea became the first in the world to commercialize Wibro service. The country also launched the Arirang II satellite, developed key technology for the 32-gigabyte NAND flash and achieved other milestones. More theses written by Korean scientists are being posted in leading international periodicals like Nature, Science and Cell.
World No. 4 in patent applications
Korea ranked fourth in the world last year in the number of patent applications with 368,000. In the number of international applications based on the Patent Cooperation Treaty, the country saw its figure jump from just 10 in 1984 to 5,935 in 2006, also good for fourth place.
A major advance for Korea came at the general assembly of the World Intellectual Property Organization in September. The Korean language was officially adopted as one of the governing body's languages for international patent applications. This is the first time a global body under the United Nations has adopted Korean as an official language.
Seoul's mid- and long-term research and development investment allots its budget to nine technological sectors divided largely into biotechnology, the environment, space technology and others. Additional investment will go toward future-oriented sectors, core technologies and public welfare. The private sector will take charge of application and commercialization once the technology has matured.
The International Institute of Management Development of Switzerland has ranked Korea's science competitiveness seventh in the world and that of technology sixth, in this year's global rankings.
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