A bit late, a firm attempts to plug a technology leak

A long-delayed reaction has followed the sale of 2,600 valuable Korean patents involving CDMA, a communications system used in cellular telephone systems here, to a U.S. company. In March, UTStarcom announced that it was acquiring the patents, along with 357 patents in other countries, for an estimated price of $12 million to $15 million. The seller of those patents, Hyundai Syscomm, would in turn be licensed to continue to use the technology contained in the patents in its business. But yesterday, the new owners of the Korean company, who took control on July 1, announced that they had learned of the sale only after they sat down in the executive suite. “The former leading shareholder, 3R, a start-up company, sold all the intellectual property rights without proper legal procedures,” the company said. Hyundai Syscomm said yesterday that the final price tag on the deal was $10.3 million rather than the higher amount UTStarcom estimated in March. The Korean company said that some of the patented technology has joint owners, including Samsung Electronics, KTF and ETRI, who allegedly did not consent to the sale. The biggest concern among industry and government officials is that the technology could wind up in Chinese hands. Korean law bans the export of core technology, although it is not clear that the patents in question would qualify as such. Basic CDMA patents are held by Qualcomm, another U.S. company, but Korean innovators have extended the technology and hold many patents on its application in cellular telephone systems. Jang Seong-ik, the president of 3R when the contract was signed, pleaded ignorance of the requirement for assent from other companies. Hyundai Syscomm was formerly a part of Hyundai Electronics. It was spun off in 2001 and sold to 3R the following year. Mired in debt, the company signed the sales contract with UTStarcom, but the cash infusion evidently was of little help. The company lost its listing on the Kosdaq exchange in April. UTStarcom, which has an office in Seoul, hired 50 CDMA engineers from Hyundai Syscomm and reportedly was until recently still in the process of obtaining the technological data backing the patents from Hyundai Syscomm. It is not clear when the new owners there, a company named Haniel, put a stop to the data transfer. The whole problem had been kept under wraps until a reporter was tipped off to it yesterday. Government agencies have threatened to try to annul the contract and beef up Korea’s laws governing the transfer of indigenous technology. UTStarcom had no comment. by Lee Won-ho, Wohn Dong-hee