Royalty payments hit all-time low

The royalty amount Korean companies paid foreign businesses has hit an all-time low, thanks to technological improvements and changes in local production strategy, a report by the Bank of Korea (BOK) said Thursday.

The BOK said Korean companies paid $400 million in the third quarter last year for the use of foreign patents, which dropped from $550 million paid in the previous quarter. It dropped by $420 million from a year ago.

The BOK added that the figure declined for two consecutive quarters and has hit an all-time low since the country started compiling the data in 2010.

The total accumulated royalties through the third quarter was $3.26 billion, a 36 percent drop from a year ago when Korean companies paid $5.13 billion.

The BOK said, however, that it is questionable whether such a trend will continue. “Most of the companies pay their royalties, including the fee for using patents, in either the first or fourth quarter relatively more than they do in the second and third quarter,” said Choi Jung-tae, deputy manager of the international index team at the BOK.

The amount paid related to patents decreased by $40 million from a year ago and significantly declined from the first quarter’s $1.87 billion.

By country, the United States received the largest amount of royalties, as Korean companies paid $1.09 billion in the third quarter last year, followed by Japan ($190 million) and Germany ($110 million).

Korea also earned some royalties. China paid the most to local companies, at $570 million. Vietnam paid $510 million to Korea, which was the all-time high for that country.

“Recently, Korean companies have received large amounts of royalties from Chinese and Vietnamese countries after building production plants and launching offices,” Choi said.

The BOK said small and midsize Korean companies earned more than they paid for royalties for 21 consecutive quarters since the third quarter of 2010, thanks to game and computer program makers.

BY KWON SANG-SOO [kwon.sangsoo@joongang.co.kr]