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U.S., Korean firms dispute tech contract

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Oct 14,2004
Following newspaper reports that a U.S. technology company that does the bulk of its business in China bought core Korean technologies, the vice president flew into Seoul to explain his firm’s position. The company, UTStarcom, acquired CDMA-related patents from Hyundai Syscomm in April. Controversy erupted after a Korean firm, Haniel, which acquired Hyundai Syscomm in July, insisted that the earlier contract was illegal and therefore invalid. CDMA is a cell phone technology standard. UTStarcom, a solutions provider, gets 85 percent of its revenues from China. UTStarcom has not violated any export control-related laws here, Michael Skarzynski, the vice president, said at a press conference yesterday. “We have not exported or transferred any technology or product outside of Korea since the acquisition,” he said. But he said his company is seeking export control authorization from the Korean government to manufacture the CDMA technologies his company acquired from Hyundai Syscomm in China ― raising concerns of technology leakage. Haniel, the new owner of Hyundai Syscomm, said that the latter company unlawfully transferred the CDMA patents, technologies, workforce and equipment to UTStarcom. UTStarcom paid $10 million to Hyundai Syscomm for 2,600 CDMA-related patents in April. Mr. Skarzynski said the payment for the patents went to creditors of Hyundai Syscomm and to employees of the company for unpaid wages. CDMA needs the approval of the government to be sold abroad. It also needs consent from the joint developers of the technology, including the Electronics and Telecommunications Research Institute, or ETRI, Samsung Electronics and LG Electronics. The contract includes no such approval. Mr. Skarzynski said Hyundai Syscomm has the responsibility to obtain such approvals, but Haniel has refused to meet its obligation. He added that the contract was legal, and UTStarcom would exercise its rights. He added that Hyundai Syscomm’s new owner is in violation of the company’s earlier contract, as it is holding the last of the patents in its supercomputer. About 85 percent of the contract has been completed so far, he said. He also said, “[UTStarcom] recently commenced legal actions against Hyundai Syscomm, including injunctive relief to enforce its contractual rights against Hyundai Syscomm and to gain full access to certain assets that are being blocked.” Mr. Skarzynski also said that the U.S. company does not need consent from the joint developers, but only from ETRI; he added that it is ETRI’s job to get assent from the other developers. He said UTStarcom is negotiating with ETRI over royalty payments, indicating that the company already received approval. But after the conference, UTStarcom Korea clarified that the company had received approvals related to IMT2000, not to CDMA technologies. “Hyundai Syscomm only has the right to use the CDMA technology, not the ownership, therefore UTStarcom has to get approval from other developers, including Samsung Electronics and LG Electronics,” said an ETRI official. He added that the contract itself is invalid, because there were no provisions in it to seek other developers’ consent. “CDMA is a core strategic technology of Korea. The government is not expected to give approval for its transfer,” said Shin Jeong-hyeok, a director of the intellectual property department at ETRI. ETRI also said that UTStarcom would not have the right to use Hyundai Syscomm’s CDMA technologies either in Korea or overseas. An official at the Ministry of Information and Communication said it has ordered ETRI to study the case and prepare counteractions. The ministry is scheduled to hold a National Assembly hearing on Thursday. Haniel, the new owner of Hyundai Syscomm, has also decided to file a suit to annul the earlier contract. by Park Sung-ha, Choi Ji-young


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