gettyimagesbank

In recent years, Korean conglomerates have conducted a number of noteworthy transactions in monetizing their intellectual property (IP), including patents, according to Burford Capital, a global legal finance firm based in London.

Their reasons may vary, it said, from reducing the financial burden of holding IP to gaining leverage in business negotiations. But regardless of the intention, monetizing patents has helped them unlock financial liquidity.

The Korea Times exclusively secured a report, Wednesday, co-authored by Katharine Wolanyk, managing director at Burford Capital, and Chris Freeman, director with responsibility for assessing and underwriting legal risk at its patent group. It is set to be published in Burford Quarterly on Thursday (Korea time).

The authors pointed out that already in 2024, there have been sizeable patent transactions involving sophisticated IP owners, including SK hynix. This year, the semiconductor giant sold over 1,500 patents to an affiliate of Korean patent aggregator Ideahub.

In November 2023, LG Electronics sold 48 standard essential patents related to codec technology to Chinese smartphone maker Oppo. The company no longer needed some of these patents after exiting the smartphone market in 2021.

"This sale is part of LG's strategy to profit from its extensive portfolio of around 24,000 patents, particularly in 4G, 5G and Wi-Fi technologies, as other Chinese smartphone makers like Oppo and Vivo have faced litigation over patent deficiencies," the report wrote.

LG Energy Solutions, another LG Group subsidiary, has announced that it "will spearhead efforts to create a patent licensing pool for electric vehicle batteries, an area where it has a world-leading patent portfolio."

Samsung has also emerged as a key player in the IP landscape, leveraging its extensive patent portfolio for innovations in telecommunications, consumer electronics and semiconductors.

"In 2023, Samsung entered multiple licensing agreements that generated immediate revenue and established long-term partnerships with other tech giants. These efforts highlight Samsung's strategic focus on robust IP management as a driver of profitability and innovation," the report said.

These moves suggest Korean companies' growing recognition of patents as valuable financial assets, though the reasons behind monetization decisions vary by company, according to the report.

One reason is that owning IP is costly by itself. The R&D investment to develop technologies can run into millions of dollars or more, followed by significant legal expenses to obtain and maintain the related patent assets.

Also, by affirmatively recovering money from their legal assets, companies can benefit from new revenue sources to supplement declining sales or shrinking profit margins. This reason particularly applies to companies that are long-established or operate in highly competitive industries.

In other cases, companies like LG Electronics have exited a line of business and no longer see the need to retain IP that is no longer core to their operations. IP can also be leveraged to advance corporate objectives, such as gaining an advantage in business negotiations.

"In an uncertain economy, companies will need to be careful in their capital management and innovative in their pursuit of value. For many patent owners, financed divestitures may be the optimal solution. For little to no risk, with minimal operational burden, companies can reduce costs and generate new revenues by leveraging their IP assets," it said.