Internet retailers face a royalty jab

Hansol CSN Co., a local online shopping firm, said yesterday the Korean Intellectual Property Office had approved its patent for a business model as of Dec. 20 last year. Companies which apply for and are granted patents receive exclusive property rights for 20 years in Korea, according to an official at the Korean Intellectual Property Office. Hansol CSN's business model patent -- which it calls an "alliance program" -- links logos and product information on its Web pages to other online sites, a company official said. "This same business model has been used by all online shopping mall companies around the world, but no one seemed to care about applying for a patent for the program in Korea until now," the official said. Hansol CSN applied for its patent in 1999, after the company had been operating its online shopping business for about a year, the official continued. "Amazon.com Inc. of the United States -- one of the world's biggest online bookstores -- acquired exclusive rights to the same business model in 1999, which encouraged Hansol CSN to make the first move in Korea," Seo Sang-jin, the managing director of Hansol CSN, said. "We have considered pursuing our intellectual property rights [in Korea], but have not decided when or how to do this," Mr Seo said. Industry sources said the more than 3,000 online shopping mall firms operating in Korea should pay royalties to Hansol CNS for using its patented alliance program, or they might have to withdraw from the electronic commerce market. They said that combined, the 3,000 companies sold an estimated 150 billion won ($130 million) of goods each month using the alliance program. An official at another online shopping firm countered the patent claim, saying: "The business model cannot be exclusively held because every online shopping firm has used it for the past three years." He said, "We will soon file a petition against Hansol CSN to the Korean Intellectual Property Office." Hansol CSN's major competitors, including Interpark Corp., Samsung Corp. and LG Home Shopping Inc., gathered last week to discuss problems with the new patent and breach of intellectual property rights, an official at Interpark Corp. said. "It is predictable that mid-sized and small online shopping companies will move out of the business because they cannot pay the royalties," the official said. Hansol CSN said its intellectual property rights should be protected, even though most online shopping companies would have to pay royalties out of their sales. Hansol officials said the firm would try to discuss the issue with other competing companies later, but gave no time frame. by Kim Jong-yoon