Intellectual property theft on the rise, survey shows

Slovie, a small manufacturer of sporting goods based in Seoul, used to be well-known in Korea as a successful local venture. But it is now better known as a prominent victim of intellectual property rights theft.

Its flagship product, Ess Board, a skateboard with two oval shaped plates linked by a steel shaft, was a new concept in 2003 and garnered wide popularity at home and abroad in the following years.

But cheap Chinese copycat boards began to erode sales, causing them to dive from 7.4 billion won ($6.5 million) in 2006 to 100 million won last year. With the loss, employment at the firm shrank from 30 to six.

More and more local companies are exposed to such intellectual property losses each year, the Ministry of Knowledge Economy said yesterday.

Data from the ministry showed that the size of financial losses local companies suffered in 2008 from infringement of their intellectual property such as brand, patent and design rights were estimated to have skyrocketed 63.2 percent from a year earlier to 1.4 trillion won, or 0.14 percent of the country’s gross domestic product. The finding, based on a survey of 44,780 local companies which registered at least one intellectual property between 2004 and 2008, showed that around 7.7 percent of local companies, or 1,940, said they were victimized by such losses in 2008.

The total number of infringement cases reported by those surveyed was 9,882, meaning each affected company suffered about five infringements a year on average. That is a 27.5 percent increase in the number of affected companies and 35 percent in the number of cases from a year earlier.

The situation is worse for smaller companies.

The number of large companies suffering from infringement rose 13.3 percent last year, compared with a 40.6 percent growth for small and midsized companies.

“Large companies are better equipped to respond to such infringements than smaller companies,” said Yoon Jong-wook, a ministry official.

The surveyed companies cited the shortage of personnel and funds or lack of information as to how to deal infringements with as reasons behind the increased damage from the theft of intellectual property.

The companies also called for more government support.

Current laws only regulate local importers or sellers, thus enabling manufacturers to produce copycat items overseas and sell them in Korea by changing local importers.

To solve this problem, the ministry said it will implement a revised act in July that can prevent copycat product makers from selling in Korea.

“We will continuously try to help local companies better deal with such infringements,” said another ministry official.

By Moon Gwang-lip [joe@joongang.co.kr]