Jiyoung Han *
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2.1. Brief History of Intellectual Property Laws and Policies in Korea
The patent system in Korea was not established by the Korean government, but voted by certain foreign powers at the start of the 20thcentury in order to protect the dominant position of foreign patent rights in the market. At first, an agreement between the US and Japan for protecting inventions, designs, patents and copyright in Korea was concluded, by which the Korean Patent Ordinance was promulgated as of August 12, 1908. It was annuled on August 29, 1910 when Korea was annexed by Japan and the Japan Patent Act came into force in Korea, which became an independent country after World War II.
Later, a patent act came into effect as part of the Industrial Property Act by Art. 91, American Military Government Ordinance. It was not until 1961 that Korea enacted a patent act of its own, with a structure similar to that of Japan and the US. Since 1961 the Korean Patent Act (KPA) has been revised around 30 times, to enable Korea to advance its industrial promotion policies.
In the meantime, the patent system in Korea has been developing, improving the efficacy of examination and judgment and simplifying procedures at the KIPO; strengthening patent protection; controlling misuse of patent rights; joining international treaties, etc. In particular, the number of unpatentable subject matters has been reduced and the current KPA contains a regulation as follows: “patents shall not be granted in respect of inventions the publication or exploitation of which would be contrary to ordre public or morality, or be harmful to public health. The patent system has been globalized through joining international treaties, for example the Paris Convention in 1980, the PCT in 1984, the Budapest Treaty in 1988; TRIPS in 1995; UPOV in 2002. In addition, a substance patent system was introduced in 1986 under commercial pressure from the US, which resulted in the granting of patents for chemical substances as well as medicines. Meanwhile, the KIPO drew up its own guidelines relating to biotechnology inventions in 1998 by which patents for inventions relaitng to human genes, plants, and animals could be granted as well. The KIPO also established a special guideline on business model patents in 2000, which made it possible to grant a patent for an invention relating to a business model. The present patent protection level in Korea can be said to be similar to that of the developed countries.
2.2. Identification of Reforms toward IP-Based Economic Development
Major reforms that have had an important influence on economic development will be identified here.
There have been approximately three major changes which have influenced the number of patent applications and registrations since the 1980s in Korea: the introduction of a substance patent system in 1986; joining TRIPS in 1994; the IMF financial crisis in 1997. Since the KPA was revised to grant patents for inventions on chemical substances in 1986, the number of patent applications increased from 12,759 in 1986 to 17,062 in 1987. The number then rose by approximately 2,000 to 3,000 every year until 1993.
In 1994 Korea joined WTO/TRIPS with effect from January 1, 1995. In the three years from 1994 to 1996 the number of patent applications increased sharply with priority given to the IT and automobile industries. However, Korea’s economy was in severe jeopardy in 1997 at the time of the IMF crisis.
This had a negative influence on R&D investment in Korean companies and resulted in a major decrease in the application of industrial property protection, particularly in the areas of automobiles, machinery and IT. However, the pharmaceutical industry was not greatly influenced by the worsening economy.
Due to national efforts to overcome the crisis, Korea’s economy began recovering and showed an annual increase of more than 6 per cent from 1999 to 2002, which certainly influenced the area of IP protection:
for example, the number of patent applications began increasing again. It is noteworthy that patents for inventions on biotechnology could be granted from 1998 according to the Examination Guidelines on
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For example, 1,891 patent applications, including 1,030 by Koreans and 861 by foreigners, were filed at the KIPO in 1999, and 1,264 patents were granted.
With regard to benefits from the export of technology Korea has earned royalties mainly from China and the US, followed by some East Asian countries including India, Indonesia and Malaysia. Korea did not make a profit from the export of technology from 1978 to 1996, but it is since 1997 that technology transfer to foreign countries has been actively pursued (Fig. 4). In particular, Korea has earned important royalties since 2003; which almost corresponds to the year in which its domestic economy started its recovery, showing the relationship between royalties from technology transfer and IP protection.
Foreign direct investment (FDI) certainly relies on the economic situation in each country. FDI in Korea decreased slightly in 1998, and more importantly from 2000 to 2003 (Fig. 5). During this period it decreased to almost 60 per cent. At that time foreign investors might have thought that Korea was still faced with financial problems even though its economy was slowly recovering. FDI doubled in 2004 in comparison with 2003, showing that foreign investors considered Korea’s economy to have begun turning around after the IMF financial crisis. On the other hand, the number of patent applications from 2001 to 2003 even slightly increased. Therefore, FDI does not seem to be proportional to patent applications.
Fig. 4.Royalties obtained from Technology Export
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As to GDP, Korea was in its worst position in 1998, but this changed in 1999 although the rise was not constant, and GDP continued decreasing until 2003, except for the period 2001 to 2002 (Fig. 6).
GDP seems to be closely related to the domestic economy as well as to IP protection.
Fig. 5.Foreign Direct Investment
Fig. 6.Real GDP (at 2000)
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