Rising royalties hint at dearth of local patents

Korean companies’ overseas royalty payments jumped 14.1 percent on-year in the first half as they relied heavily on foreign patents and intellectual property rights for their products, central bank data showed yesterday.

The country’s overseas payments of royalties and license fees amounted to a record $4.31 billion in the January-June period, compared with $3.78 billion a year earlier, according to the data by the Bank of Korea. The amount stands as the largest first-half tally ever.

In the cited period, local firms earned a record $2.05 billion from royalties paid by foreign companies, but their overseas payments outweighed income, leading the country to post a royalty balance deficit of $2.26 billion.
The balance tracks the nation’s cross-border expenses and income for using patents and copyrights as well as brand royalties.

Korea has seen a chronic deficit in the balance of cross-border money flows for using patents, indicating that the country still heavily relies on the manufacturing industry and falls short of posting meaningful growth in the knowledge-based sector, according to market watchers.

Usually, companies pay overseas royalties in tandem with sales, but a spike in overseas payments of using foreign patents is feared to affect corporate earnings and share prices if global moves to protect intellectual property rights strengthen, analysts say.

Exports account for about 50 percent of the Korean economy, and the country’s overseas shipments of tech-related products make up for around 28 percent out of total exports.

Korea is widely viewed as a tech powerhouse, with Samsung Electronics leading the global smartphone market.

Yonhap